UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number:
(Exact name of registrant as specified in its charter)
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Securities registered pursuant to Section 12(b) of the Act:
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Securities registered pursuant to Section 12(g) of the Act:
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Indicate by a check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by a check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The aggregate market value of the voting common equity held by non-affiliates of the registrant was approximately $
As of August 31, 2021, there were
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required by Part III of this Amended Annual Report on Form 10-K/A is incorporated by reference from the registrant’s definitive proxy statement for the annual meeting of stockholders to be held in December 2021, which will be filed with the Securities and Exchange Commission within 120 days after the close of the registrant’s fiscal year ended June 30, 2021.
EXPLANATORY NOTE
In May 2022, the Company determined that it made certain errors in the manner in which it recognized revenue from its License, Development and Commercialization Agreement with Kyowa Kirin Company (the “KKC Commercialization Agreement”) with the result that revenue was overstated in some quarters and understated in other quarters in the Company's financial statements for the fiscal years ended June 30, 2021 and 2020. The errors relate to the appropriate timing and amounts of revenue recognized over time under the cost-to-cost method associated with the KKC Commercialization Agreement. The errors did not have any effect on the Company's previously reported operating expenses, or cash and short-term investments.
Specifically, the Company determined the transaction price related to the KKC Commercialization Agreement and allocated the transaction price to various performance obligations, including development services. The Company is primarily responsible for conducting the development of zandelisib and is incurring the costs of development. The KKC Commercialization Agreement provides that both KKC and the Company share the development expenses. Consistent with Generally Accepted Accounting Principles, the Company developed a revenue recognition model which treated the expense reimbursements it would receive for future development expenses as variable consideration and applied a constraint on the amount of variable consideration expected to be received to exclude reimbursements beyond a rolling 30-month time period due to the uncertainties inherent in clinical research. The estimated variable consideration was recognized as revenue based on the proportional performance of the development services. As disclosed in the Company’s previously filed financial statements, the Company has updated this model each quarter since the year ended June 30, 2020 to reflect changes in the estimated future development cost reimbursement amounts and other matters and has recognized revenue from development services based on the proportional performance of the development activities. Under the KKC Commercialization Agreement, however, expense reimbursements received from KKC are not subject to refund. The Company’s revenue recognition model thus had the unintended effect of inappropriately deferring a portion of the cost-sharing reimbursement revenue to future periods. The Company’s revenue recognition model inappropriately understated revenues for the quarters ended September 30, 2020, December 30, 2020 and March 31, 2021. The revenue recognition model inappropriately overstated revenues for the quarters ended June 30, 2021, September 30, 2021 and December 31, 2021. The Company is restating its affected historical financial statements to correct this error.
In connection with the restatement, the Company has also corrected the amount of cumulative catch-up adjustment recorded as a result of the termination of the KKC Japan License agreement and the execution of the KKC Commercialization Agreement, as well as other errors associated with the KKC Commercialization Agreement that it determined to be immaterial, both individually and in the aggregate, to the financial statements for the fiscal years ended June 30, 2021 and 2020. A summary of the accounting impacts of these adjustments to the Company's financial statements as of and for the fiscal years ended June 30, 2021 and 2020 is provided in Note 1 "Restatement of Previously Issued Financial Statements," of the Notes to Financial Statements of this Form 10-K/A. The effect of these errors was an understatement of revenue of $9.3 million for the year ended June 30, 2021 and an overstatement of revenue of $1.2 million for the year ended June 30, 2020.
This Amended Annual Report also amends and restates the Company's Management's Discussion and Analysis of Financial Condition and Results of Operations, Risk Factors and other disclosures made in the Original Form 10-K, as appropriate, to reflect the restatement of the relevant periods.
In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Company is also including with this Amended Annual Report currently dated certifications of the Company's Chief Executive Officer and Principal Financial Officer (attached as Exhibits 31.1, 31.2, and 32.1).
As a result of the restatement, the Company has concluded there was a material weakness in its internal control over financial reporting as of June 30, 2021, and its disclosure controls and procedures were not effective. See additional discussion included in Part II, Item 9A of this Amended Annual Report.
Except as discussed above and as further described in Note 1, Note 1A, Note 2, and Note 13 in the Notes to Financial Statements, the Company has not modified or updated disclosures presented in this Amended Annual Report. Accordingly, the Amended Annual Report does not reflect events occurring after the Original Form 10-K ori modify or update those disclosures affected by subsequent events. Information not affected by the restatement is unchanged and reflects disclosures made at the time of the filing of the Original Form 10-K.
The Company has amended its previously filed Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for the periods affected by the restatement. Other financial information that has been previously filed or otherwise reported for these periods is superseded by the information in this Amended Annual Report and in the amendments to our Quarterly Reports on Form 10-Q for the periods ended September 30, 2021 and December 31, 2021 filed on the date hereof, and the financial statements and related financial information contained in such previously filed reports should no longer be relied upon.
The restatement is more fully described in Note 1 of the Notes to Financial Statements included herein.
MEI PHARMA, INC.
TABLE OF CONTENTS
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Item 1: |
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Item 1A: |
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Item 1B: |
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Item 2: |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 7a: |
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
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Item 11: |
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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Certain Relationships and Related Transactions, and Director Independence |
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Forward-Looking Statements
This Amended Annual Report, includes forward-looking statements, which involve a number of risks and uncertainties. These forward-looking statements can generally be identified as such because the context of the statement will include words such as “may,” “will,” “intend,” “plan,” “believe,” “anticipate,” “expect,” “estimate,” “predict,” “potential,” “continue,” “likely,” or “opportunity,” the negative of these words or other similar words. Similarly, statements that describe our future plans, strategies, intentions, expectations, objectives, goals or prospects and other statements that are not historical facts are also forward-looking statements. Discussions containing these forward-looking statements may be found, among other places, in “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Amended Annual Report. For such statements, we claim the protection of the Private Securities Litigation Reform Act of 1995. Readers of this Amended Annual Report are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the time this Amended Annual Report was filed with the Securities and Exchange Commission, or SEC. These forward-looking statements are based largely on our expectations and projections about future events and future trends affecting our business, and are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. These risks and uncertainties include, without limitation, those discussed in “Risk Factors” and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Amended Annual Report. Other sections of this report and our other filings with the SEC may include additional factors which could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. There is substantial uncertainty regarding the impact of the COVID-19 outbreak (as defined below) on our business, industry, global economic conditions and government policy. New risk factors emerge from time to time and it is not possible for us to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. In addition, past financial or operating performance is not necessarily a reliable indicator of future performance, and you should not use our historical performance to anticipate results or future period trends. We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition. Except as required by law, we undertake no obligation to update publicly or revise our forward-looking statements to reflect events or circumstances that arise after the filing of this Amended Annual Report or documents incorporated by reference herein that include forward-looking statements.
Unless the context requires otherwise, references in this Amended Annual Report to “MEI Pharma,” “we,” “us” and “our” refer to MEI Pharma, Inc.
MEI Pharma, Inc. and our corporate logo are registered service marks of MEI Pharma. Any other brand names or trademarks appearing in this Amended Annual Report are the property of their respective holders.
6
PART I
Item 1. Business
Overview
MEI Pharma, Inc. is a late-stage pharmaceutical company committed to the development and commercialization of novel cancer therapies intended to improve outcomes for patients. Our portfolio of drug candidates has four clinical-stage assets, including zandelisib (f/k/a ME-401), currently in multiple ongoing clinical studies intended to support marketing applications with the U.S. Food and Drug Administration (“FDA”) and other regulatory authorities globally. Our common stock is listed on the Nasdaq Capital Market under the symbol “MEIP.”
Our approach to building our pipeline is to license or acquire promising cancer agents and build value in programs through development, commercialization and strategic partnerships, as appropriate.
In January 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”) and the risks to the international community. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. As a result of the ongoing and rapidly evolving COVID-19 pandemic, various public health orders and guidance measures have been implemented across much of the United States, and across the globe, including in the locations of our office, clinical trial sites, key vendors and partners. Despite the relaxation of many governmental orders earlier this year, COVID-19 still impacts the normal conduct of business. In addition, although the FDA authorized vaccines for the treatment of COVID-19, and although a significant portion of the U.S. population has been vaccinated, the vaccination rate of the population and the effectiveness of the vaccines, particularly with respect to the COVID-19 Delta variant, as well as other variants, continues to create uncertainty. Furthermore, the COVID-19 virus may continue to mutate into different strains, which could be more contagious or severe or for which current vaccines and treatments are not effective or available.
While we continue to enroll and dose patients in our clinical trials, certain of our clinical trials have been delayed due to COVID-19 and our clinical development program timelines may continue to be subject to potential negative impacts from the ongoing pandemic in the U.S. and globally. The extent to which the ongoing pandemic continues to impact our business, including our preclinical studies, chemistry, manufacturing and controls (“CMC”) studies, manufacturing, and clinical trials, will depend on future developments, which are highly uncertain and cannot be predicted with confidence including the ultimate geographic spread of the disease, the duration of the pandemic, the effectiveness and timing of distribution of treatments and vaccines for COVID-19, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease and to minimize its economic impact, including vaccination rates and effectiveness.
We may experience enrollment delays and suspensions, patient withdrawals, postponement of planned clinical or preclinical studies, redirection of site resources from studies, and study deviations or noncompliance. We may also need to maintain or implement study modifications, suspensions, or terminations, the introduction of additional remote study procedures and modified informed consent procedures, study site changes, direct delivery of investigational products to patient homes or alternative sites, which may require state licensing, and changes or delays in site monitoring. The foregoing may require that we consult with relevant review and ethics committees, Institutional Review Boards ("IRBs"), and the FDA. The foregoing may also impact the collection, tabulation, analysis and integrity of our study data. The COVID-19 outbreak may further increase the need for clinical trial patient monitoring and regulatory reporting of adverse effects, may impact trial data collection and recording at the clinical research sites, and may delay regulatory authority meetings, inspections, or the regulatory review of marketing or investigational applications or submissions.
Not only might the continuing COVID-19 pandemic impact the conduct of our clinical trials, but it may also impact our ability to procure the necessary supply of our investigational drug products, as well as any ancillary supplies necessary for the conduct of our studies. This could happen for a variety of reasons, including manufacturing shortages or shutdowns, or a manufacturer need to prioritize other products or customers over us, including under the Defense Production Act. Third party manufacturers may also need to implement measures and changes, or deviate from typical manufacturing requirements that may otherwise adversely impact our product candidates.
In light of the COVID-19 outbreak, the FDA issued a number of new guidance documents. Specifically, as a result of the potential effect of the COVID-19 outbreak on many clinical trial programs in the U.S. and globally, the FDA issued guidance concerning potential impacts on clinical trial programs, which guidance the FDA has continually updated. In addition, the European Medicines Agency (“EMA”) as well as various country regulatory authorities (EU and UK) have issued similar guidance. We have adapted the FDA and EMA/UK guidance for study procedures, data collection, and oversight resulting from the pandemic.
Although the U.S, federal government has implemented various economic stimulus programs in response to the COVID-19 pandemic, none of such programs have had a material impact on our financial condition, results of operations, or liquidity.
7
Clinical Development Programs
We build our pipeline by licensing or acquiring promising cancer agents and creating value in programs through development, commercialization and strategic partnerships, as appropriate. Our objective is to leverage the mechanisms and properties of our pipeline drug candidates to optimize the balance between efficacy and tolerability to meet the needs of patients with cancer. Our drug candidate pipeline includes:
Zandelisib (f/k/a ME-401): PI3Kδ Inhibitor in Multiple Trials Intended to Support Marketing Approvals in Relapsed or Refractory Follicular and Marginal Zone Lymphomas
Zandelisib is an oral, once-daily, selective PI3Kδ inhibitor in clinical development for the treatment of B-cell malignancies. In March 2020, the FDA granted zandelisib Fast Track designation for the treatment of adult patients with relapsed or refractory (“r/r”) follicular lymphoma (“FL”) who have received at least two prior systemic therapies. In April 2020, we entered into a global license, development and commercialization agreement to further develop and commercialize zandelisib with Kyowa Kirin Co., Ltd. (“KKC”). MEI and KKC will co-develop and co-promote zandelisib in the U.S., with MEI recording all revenue from U.S. sales. KKC has exclusive commercialization rights outside of the U.S.
We are conducting multiple ongoing studies evaluating zandelisib. Our studies include TIDAL, a Phase 2 study evaluating zandelisib as a monotherapy in patients with r/r FL and marginal zone lymphoma (“MZL”) patients who have received at least two prior lines of treatment. Enrollment in the FL primary efficacy population of TIDAL completed in April 2021; enrollment of the MZL arm remains ongoing. Subject to the results, data from TIDAL is intended to support submissions for accelerated approval marketing applications with the FDA in r/r FL and MZL patients receiving at least two prior lines of treatment.
Also ongoing is COASTAL, a Phase 3 study evaluating zandelisib in combination with rituximab in patients with r/r FL and MZL who have received at least one prior line of treatment. COASTAL is intended to support full marketing applications in the U.S. and globally in r/r FL and MZL patients receiving at least one prior line of treatment. COASTAL is also intended (subject to FDA agreement) to act as the required confirmatory study for the potential U.S. accelerated approvals of zandelisib based on the TIDAL study.
8
We are also conducting a multi-arm, open-label, Phase 1b dose finding and expansion trial evaluating zandelisib as a monotherapy and in combination with other therapies in patients with relapsed or refractory B-cell malignancies. Other initiated studies include Phase 1 and Phase 2 studies being conducted by KKC evaluating zandelisib as a monotherapy in patients in Japan with indolent B-cell malignancy pursuant to our agreement with KKC.
Zandelisib: Potentially Highly Differentiated Pharmaceutical Properties within a Clinically Validated Class of Treatments
While PI3Kδ inhibitors as a group are a clinically validated class for the treatment of B-cell malignancies, the FDA approved orally administered products, idelalisib (marketed as Zydelig®), duvelisib (marketed as COPIKTRA®), umbralisib (marketed as UKONIQ), and the intravenously administered PI3Kδ/α inhibitor copanlisib (marketed as Aliqopa®), are challenged by dose-limiting toxicities, modest efficacy and/or inconvenience of administration route. We believe this provides an opportunity for the development of a next-generation candidate with pharmaceutical properties that may better maximize the therapeutic potential of PI3Kδ inhibition by limiting toxicities and improving upon modest efficacy, which together hinder clinical utility.
The molecular structure and pharmacodynamic characteristics of zandelisib are distinct from the FDA approved PI3Kδ inhibitors. Zandelisib’s distinct characteristics include prolonged target binding, preferential cellular accumulation, high volume of distribution throughout the body tissues, and an approximately 28-hour half-life suitable for once daily oral administration. The properties of zandelisib support exploration of flexible dosing regimens such as an intermittent dosing schedule, which has clinically demonstrated to date the potential to maintain clinical benefit while minimizing immune-related toxicities common to other PI3Kδ agents, either as a monotherapy or in combination with other therapies.
KKC License, Development and Commercialization Agreement
In April 2020, we entered into a License, Development and Commercialization Agreement with KKC (the “KKC Commercialization Agreement”). We granted to KKC a co-exclusive, sublicensable, payment-bearing license under certain patents and know-how controlled by us to develop and commercialize zandelisib and any pharmaceutical product containing zandelisib for all human indications in the U.S., and an exclusive (subject to certain retained rights to perform obligations under the agreement), sublicensable, payment-bearing, license under certain patents and know-how controlled by us to develop and commercialize zandelisib and any pharmaceutical product containing zandelisib for all human indications in countries outside of the United States (the “Ex-U.S”). KKC grants to us a co-exclusive, sublicensable, license under certain patents and know-how controlled by KKC to develop and commercialize zandelisib for all human indications in the U.S., and a co-exclusive, sublicensable, royalty-free, fully paid license under certain patents and know-how controlled by KKC to perform our obligations in the Ex-U.S. under the KKC Commercialization Agreement. The KKC Commercialization Agreement substantially retains and consolidates the terms of the 2018 license agreement with KKC to develop and commercialize zandelisib in Japan.
KKC will be responsible for the development and commercialization of zandelisib in the Ex-U.S. and, subject to certain exceptions, will be solely responsible for all costs related thereto. We will co-develop and co-promote zandelisib with KKC in the U.S., with the Company recording all revenue from U.S. sales. We will share U.S. profits and costs (including development costs) on a 50-50 basis with KKC. We will also provide to KKC certain drug supplies necessary for the development and commercialization of zandelisib in the Ex-U.S. pursuant to supply agreements to be entered into on customary terms, with the understanding that KKC will assume responsibility for manufacturing for the Ex-U.S. as soon as practicable.
Under the terms of the KKC Commercialization Agreement, KKC paid us an initial payment of $100 million. We may also earn up to approximately $582.5 million in potential development, regulatory and commercialization milestone payments, plus royalties on net sales of zandelisib in the Ex-U.S., which are tiered beginning in the teens.
Zandelisib Scientific Overview: at the Crossroads of B-cell Signaling Pathways
The PI3K/AKT/mTOR pathway is an important signaling pathway for many cellular functions such as cell survival, cell cycle progression and cellular growth. PI3Ks are a family of enzymes within this pathway that have been shown to play a critical role in the proliferation and survival of certain cancer cells.
There are several isoforms of PI3K that are expressed in different types of cells. The PI3Kδ isoform is at the crossroads of B-cell receptor signaling pathways that are major drivers of survival and proliferation of many B-cell malignancies. Because the δ isoform is often overexpressed in cancer cells of the B-lymphocyte lineage, such as B-cell leukemias and lymphomas, it is understood to be important for survival of these cells. Zandelisib displays high selectivity for the PI3K delta isoform and functions to inhibit its activity.
9
Clinical Program Overview
We are conducting multiple ongoing studies evaluating zandelisib including TIDAL, a global Phase 2 trial evaluating patients with r/r FL and MZL with at least two prior of lines of therapy that is intended to support FDA marketing applications for accelerated approval. Also ongoing is COASTAL, a global Phase 3 study evaluating patients with r/r FL and MZL with at least one prior line of therapy that is intended to support full marketing authorization with the FDA as well as regulatory authorities globally.
Additionally, we are conducting a multi-arm, open-label, Phase 1b dose escalation and expansion trial as a monotherapy and in combination with other therapies in patients with FL and other B-cell malignancies. The Phase 1b trial includes an arm exploring zandelisib in combination with zanubrutinib (marketed as BRUKINSA®), an inhibitor of Bruton’s tyrosine kinase developed by BeiGene, Ltd. (“BeiGene”). This study arm completed the safety evaluation stage in patients with B-cell malignancies and has expanded into disease specific B-cell malignancy cohorts. The evaluation of zandelisib in combination with zanubrutinib is conducted under a collaboration established with BeiGene in October 2018, pursuant to which the cost of the combination trial is being equally shared, and each company is supplying its own investigational agent. We retain all commercial rights to zandelisib (subject to the KKC Commercialization Agreement) and BeiGene retains all commercial rights to zanubrutinib.
Ongoing clinical trials also include Phase 1 and Phase 2 studies conducted by KKC evaluating zandelisib as a monotherapy in patients in Japan with indolent B-cell malignancies. The Phase 2 study is intended to support marketing authorization in Japan.
In addition to other planned clinical studies sponsored by us, such as initiation of a Phase 2 study evaluating zandelisib plus venetoclax in patients with chronic lymphocytic leukemia ("CLL"), we also plan to support select investigator-initiated studies, including one being conducted at the Cleveland Clinic evaluating zandelisib combined with standard of care in patients with newly diagnosed diffuse large B-cell lymphoma (“DLBCL”).
Phase 1b Multi-arm Trial
In May 2021, we reported updated data from the ongoing Phase 1b clinical trial evaluating zandelisib as a monotherapy and in combination with rituximab and zanubrutinib in patients with r/r FL and other B-cell malignancies as featured in poster discussions at the American Society of Clinical Oncology ("ASCO") 2021 annual meeting.
Data were reported from 37 patients with r/r FL administered zandelisib 60 mg once daily for two 28-day cycles and then on an intermittent schedule (“IS”) of once daily dosing for the first seven days of each subsequent 28-day cycle. The objective of this data presentation was to evaluate the safety, tolerability and efficacy of zandelisib as monotherapy or in combination with rituximab in patients with FL who had disease progression within 24 months after initial chemoimmunotherapy ("POD24") or disease progression beyond 24 months ("non-POD24").
The overall response rate in the 37 patients with r/r FL was 87%, with 27% achieving a complete response. The overall response rate was 78% in 18 patients administered zandelisib as a monotherapy and 95% in 19 patients administered zandelisib in combination with rituximab. The overall response rate in nine evaluable patients with CLL, previously reported separately, was 89%.
Overall Response Rates (“ORR”)
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POD24 |
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Non-POD24 |
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Total FL |
Overall response rate (ORR) |
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18 (82%) |
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14 (93%) |
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32 (87%) |
Regimen |
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Monotherapy |
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8/11 (73%) |
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6/7 (86%) |
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14/18 (78%) |
Combination with rituximab |
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10/11 (91%) |
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8/8 (100%) |
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18/19 (95%) |
Prior lines of therapy |
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1 prior |
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5/7 (71%) |
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9/9 (100%) |
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14/16 (88%) |
≥ 2 prior |
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13/15 (87%) |
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5/6 (83%) |
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18/21 (86%) |
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CR rate, n (%) |
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4 (18%) |
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6 (40%) |
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10 (27%) |
Median duration of response in the 37 patients with FL, as reported in a poster presentation at the 16th International Conference on Malignant Lymphoma, has not yet been reached, and median follow-up was 16.9 months (range: 1.2 to 33.1 months). Responses appeared durable across patient subsets analyzed (prior lines of therapy (1 vs ≥ 2), treatment group (i.e., monotherapy or in combination with rituximab) or tumor bulk (< 5 cm vs ≥5 cm)).
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Duration of Response: Follicular Lymphoma Patients
Zandelisib was generally well-tolerated. The rate of drug related grade 3 Adverse Events of Special Interest (“AESI”) in the 37 patients with r/r FL was: diarrhea 5% (2/37); colitis 5% (2/37); rash 8% (3/37); alanine aminotransferase (“ALT”)/ aspartate aminotransferase (“AST”) elevation 8% (3/37); The discontinuation rate due to adverse events was 8% (3/37).
Data from the arm of the Phase 1b study evaluating 20 patients receiving zandelisib in combination with zanubrutinib was also reported in a poster session at the ASCO 2021 Annual Meeting. In this arm of the study two treatment dosing regimens were explored: Group A received zandelisib 60 mg, oral, daily continuously for eight weeks followed by days 1-7 of each subsequent 28-day cycle, and zanubrutinib, 160 mg oral, twice daily; Group B received zandelisib 60 mg, oral, daily on days 1-7 of each 28-day cycle starting Cycle 1 and zanubrutinib 80 mg, oral, twice daily. Group A enrolled a total of seven patients: one FL, three CLL, one MZL, one mantle cell lymphoma ("MCL"), and one diffuse large B-cell lymphoma/high grade B-cell lymphoma ("DLBCL/HGBCL"). Group B enrolled a total of 13 patients: seven FL, two CLL, one MZL, and three DLBCL/HGBCL. Treatment was continued until disease progression, intolerance or withdrawal of consent.
The overall response rate in all evaluable patients with r/r indolent B-cell malignancies and CLL was 100%. No response was noted in the two patients with DLBCL/HGBCL. Responses were durable with median follow up for all patients was 6.6 months (0.6 to 21.3 months) with the majority of responders still on treatment.
Overall Response Rate
Evaluable |
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FL |
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CLL/SLL |
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MZL |
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MCL |
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DLBCL/HGBCL |
ORR*, n (%) |
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8 (100%) |
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5 (100%) |
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2 (100%) |
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1 (100%) |
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0 (0%) |
Group A |
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1 (100%) |
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3 (100%) |
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1 (100%) |
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1 (100%) |
|
0 (0%) |
Group B |
|
7 (100%) |
|
2 (100%) |
|
1 (100%) |
|
0 (0%) |
|
0 (0%) |
*CR/CRi in two of eight patients with FL (25%) and in two of five patients with CLL (40%).
Imaging scans were taken at months 3, 7, 13, and then every six months until disease progression. Response reported based on Lugano criteria and International Workshop on Chronic Lymphocytic Leukemia ("iwCLL"). Two of 20 patients (one in DLBCL and one in HGBCL) did not have on-therapy scans. One patient had clinical progressive disease ("PD") and one patient had adverse events ("AE") due to prior therapy and discontinued early. Median follow-up time was 6.6 months for all patients (range 0.6 to 21.3 months), 3.6 months for Group A (range 0.6 to 21.3 months), and 6.6 months for Group B (range 1.9 to 14.1 months).
Group B, which received zandelisib 60 mg orally, daily on days 1-7 of each 28-day cycle starting Cycle 1 and zanubrutinib 80 mg, orally, twice daily, was well tolerated across the various B-cell malignancies in the completed part of the study. The combination administered on the optimized, Group B, dosing regimen did not result in additive toxicity to each agent alone. One of the two patients with Grade 3 AST/ALT increases in Group B was successfully retreated and continued therapy.
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Treatment-Emergent Adverse Events of Special Interest
Grade 3-4 AESI, n (%) |
|
Group A |
|
Group B |
ALT / ALT increased |
|
2 (29%) |
|
2 (15%) |
Rash |
|
1 (14%) |
|
0 (0%) |
CMV colitis |
|
1 (14%) |
|
0 (0%) |
Pneumonia |
|
*1 (14%) |
|
0 (0%) |
Diarrhea |
|
0 (0%) |
|
0 (0%) |
Atrial fibrillation |
|
0 (0%) |
|
0 (0%) |
* 1 DLBCL patient had several Grade 3 AEs on Day 1 attributed to prior therapy and discontinued treatment on Day 17.
The Phase 1b study is continuing to enroll expansion cohorts in r/r FL and r/r MCL to further evaluate the combination of zandelisib 60 mg administered on days 1-7 starting Cycle 1 and zanubrutinib administered at 80 mg twice daily.
TIDAL: A Phase 2 Trial Intended to Support Accelerated Approval of Marketing Applications
TIDAL is a global Phase 2 trial evaluating zandelisib as a monotherapy across two study arms: the first study arm for the treatment of adults with r/r FL and the second study arm for r/r MZL, in both cases after failure of at least two prior systemic therapies including chemotherapy and an anti-CD20 antibody. Subject to the results and discussions with the FDA, data from each study arm are intended to be submitted to the FDA to support marketing applications for accelerated approval. The study is evaluating zandelisib administered once daily at 60 mg for two 28-day cycles and then on an intermittent schedule of once daily dosing for the first seven days of each subsequent 28-day cycle (i.e., IS). The primary efficacy endpoint will be the rate of objective responses to therapy and other endpoints will include duration of response and tolerability of zandelisib. The primary efficacy population sample size for r/r FL is 91 patients and the primary efficacy population sample size for r/r MZL is 64 patients. Total study enrollment in the FL arm will be 120 patients to provide additional safety data for the registration application. Enrollment of the FL arm of the TIDAL study is complete.
COASTAL: A Phase 3 Trial Intended to Support Full FDA and Global Marketing Authorizations
COASTAL is a global, randomized, two-arm Phase 3 trial comparing zandelisib plus rituximab to standard of care chemotherapy plus rituximab, in patients with r/r FL or MZL who received at least one prior line of therapy, which must have included an anti-CD20 antibody in combination with chemotherapy or lenalidomide. COASTAL is expected to enroll 534 patients. Zandelisib will be administered once daily for two 28-day cycles followed by an intermittent schedule of once daily dosing for seven days of each subsequent 28-day cycle for a total of 24 months, in combination with rituximab (R) in the first six months only. The control arm will consist of six cycles of the standard chemoimmunotherapy regimens R-CHOP or R-bendamustine. The primary efficacy endpoint is progression-free survival; secondary endpoints include overall response rate, overall survival, patient reported outcomes assessments, and safety and tolerability.
COASTAL is intended to support full marketing applications in the U.S. and globally in r/r FL and MZL patients who have received at least one prior line of treatment. COASTAL is also intended (subject to FDA agreement) to act as the required confirmatory study for the potential U.S. accelerated approval of zandelisib based on the ongoing Phase 2 TIDAL study evaluating patients with r/r FL and MZL patients who have received two or more prior lines of treatment.
Impact of COVID-19 on the TIDAL and COASTAL Studies
The extent to which the COVID-19 pandemic will impact the progress of the zandelisib development program, including the enrollment and completion of the COASTAL and TIDAL studies, is subject to future developments, which are highly uncertain and cannot be predicted with confidence. Currently, we believe that the integrity of the program and individual studies remains intact; however, the pandemic did have a negative impact on the rate of enrollment in the TIDAL study. The development program remains ongoing and is continuing to enroll patients, although enrollment may potentially occur at a reduced rate. Topline data from the Phase 2 TIDAL study is expected in the fourth calendar quarter of 2021. We will continue to closely monitor for potential negative impacts on the development program related to the ongoing COVID-19 pandemic. We will also continue efforts to be proactive in managing the impact from the pandemic, including various actions to communicate with sites and investigators, and making accommodations to patients consistent with FDA guidance and guidance from other regulatory authorities, as we may deem appropriate.
Voruciclib: CDK Inhibitor with CDK9 Inhibition in Phase 1 Studies
Voruciclib is an orally administered CDK inhibitor differentiated by its potent in vitro inhibition of CDK9 in addition to CDK6, 4 and 1. Voruciclib is being evaluated in a Phase 1b trial evaluating dose and schedule in patients with acute myeloid leukemia (“AML”) and B-cell malignancies. Voruciclib is also being evaluated in pre-clinical studies to explore the potential synergistic activity in various solid tumor cancers of voruciclib in combination with drug-candidates that directly inhibit KRAS as well as other targets in the RAS signaling pathway.
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Voruciclib Scientific Overview: Cell Cycle Signaling
CDK9 has important functions in cell cycle regulation, including the modulation of two therapeutic targets in cancer:
Voruciclib: Inhibition of MCL1
In pre-clinical studies voruciclib shows dose-dependent suppression of MCL1; in December 2017, a study of voruciclib published in the journal Nature Scientific Reports reported that the combination of voruciclib plus the BCL-2 inhibitor venetoclax was capable of inhibiting two master regulators of cell survival, MCL-1 and BCL-2, and achieved synergistic antitumor effect in an aggressive subset of DLBCL pre-clinical models.
Additionally, a peer reviewed manuscript published in 2020 by Luedtke et al, concluded that the inhibition of CDK9 by voruciclib synergistically enhances cell death induced by the Bcl-2 selective inhibitor venetoclax in preclinical models of acute myeloid leukemia.
The research presented suggests that voruciclib could be an attractive therapeutic target for treating cancers in combination with venetoclax or other BCL-2 inhibitors.
Voruciclib: Inhibition of MYC
KRAS mutated cancers are frequently associated with overexpression of MYC, a transcription factor regulating cell proliferation and growth. CDK9 is a known regulator of MYC transcription and a modulator of MYC protein phosphorylation. Data reported at the American Association for Cancer Research ("AACR") Annual Meeting 2021 in preclinical models demonstrates that voruciclib:
The research presented suggests that voruciclib could be an attractive therapeutic target for cancers driven by KRAS mutations.
Clinical Program
We are evaluating patients with hematological malignancies in a Phase 1b clinical trial evaluating the dose and schedule of voruciclib. The trial is initially intended to evaluate the dose and schedule of voruciclib as a monotherapy in patients with relapsed and refractory B-cell malignancies and AML after failure of prior standard therapies to determine the safety, preliminary efficacy and maximum tolerated dose. Once initial dose levels and schedules have been established, we plan in parallel, subject to FDA agreement, to evaluate the dose and schedule of voruciclib in combination with a BCL2 inhibitor such as venetoclax to assess synergies and the opportunity for combination treatments, initially in patients with AML and subsequently across multiple indications.
Preliminary data to date from the Phase 1b study evaluating voruciclib as a monotherapy at the doses studied demonstrates that voruciclib has not been associated with drug related gastrointestinal toxicity or neutropenia. Also, favorable pharmacokinetics have been observed, including a half-life supporting once-a-day oral dosing and dose proportional C-max. Our projections suggest that doses of 150-200 mg may be sufficient to achieve plasma concentrations sufficient to inhibit the molecular target. Early signs of biological activity have also been observed in patients with AML.
Voruciclib was also previously evaluated in more than 70 patients with solid tumors in multiple Phase 1 studies. The totality of the clinical data, along with data from pre-clinical studies, suggests voruciclib’s ability to inhibit its molecular target at a projected dose as low as 150 mg daily. In one clinical study, voruciclib was evaluated in combination with vemurafenib (marketed as Zelboraf®) in nine patients with
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BRAF mutated advanced/inoperable malignant melanoma. Three of three BRAF/MEK naive patients achieved a response: two partial responses and one complete response. In this study voruciclib was dosed at 150 mg daily plus vemurafenib 720 mg or 960 mg twice daily in 28-day cycles. The most common adverse events were fatigue, constipation, diarrhea, arthralgia and headache. One instance of grade 3 fatigue was dose limiting and no serious adverse events related to voruciclib were reported. Other clinical studies evaluated voruciclib at doses up to 850 mg in patients with solid tumors, demonstrating additional evidence of potential biologic activity and an adverse event profile generally consistent with other drugs in its class.
Impact of COVID-19 on the Voruciclib Clinical Development Program
While the extent to which the COVID-19 pandemic will impact the progress of the voruciclib clinical development program, including the ongoing Phase 1b study, is subject to future developments, which are highly uncertain and cannot be predicted with confidence, the study remains ongoing and is continuing to enroll patients; however, the rate of enrollment of patients has been negatively impacted by the pandemic. We will continue efforts to be proactive in managing the impact from the pandemic, including various actions to communicate with sites and investigators, and making accommodations to patients consistent with FDA guidance as we may deem appropriate.
ME-344: Clinical Stage Mitochondrial Inhibitor with Combinatorial Potential
ME-344 is our novel and tumor selective, isoflavone-derived mitochondrial inhibitor drug candidate. It directly targets the OXPHOS complex 1, a pathway involved in adenosine triphosphate ("ATP") production in the mitochondria. ME-344 was studied in an investigator-initiated, multi-center, randomized clinical trial in combination with the vascular endothelial growth factor (“VEGF”) inhibitor bevacizumab (marketed as Avastin ®) in a total of 42 patients with human epidermal growth factor receptor 2 (“HER2”) negative breast cancer.
ME-344 Scientific Overview: Cancer Metabolism
Tumor cells often display a high metabolic rate to support cell division and growth. This heightened metabolism requires a continual supply of energy in the form of ATP. The two major sources of ATP are the specialized cellular organelles termed mitochondria and through the metabolism of carbohydrates, proteins and lipids.
ME-344 was identified through a screen of more than 400 new chemical structures originally created based on the central design of naturally occurring plant isoflavones. We believe that some of these synthetic compounds, including our drug candidate ME-344, interact with specific mitochondrial enzyme targets, resulting in the inhibition of ATP generation. When these compounds interact with their target, a rapid reduction in ATP occurs, which leads to a cascade of biochemical events within the cell and ultimately to cell death.
Clinical Program
ME-344 demonstrated evidence of single agent activity against refractory solid tumors in a Phase 1 trial, and in pre-clinical studies tumor cells treated with ME-344 resulted in a rapid loss of ATP and cancer cell death. In addition to single agent activity, ME-344 may also have significant potential in combination with anti-angiogenic therapeutics. In pre-clinical studies, it was shown that one outcome of anti-angiogenics was to reduce the rate of glycolysis in tumors as a mechanism to slow tumor growth. However, tumor metabolism was able to shift to mitochondrial metabolism for energy production to support continued tumor proliferation. In such cases of tumor plasticity in the presence of treatment with anti-angiogenics, targeting the alternative metabolic source with ME-344 may open an important therapeutic opportunity.
Support for this combinatorial use of ME-344 was first published in the June 2016 edition of Cell Reports; pre-clinical data from a collaboration with the Spanish National Cancer Research Centre in Madrid demonstrated mitochondria-specific effects of ME-344 in cancer cells, including substantially enhanced anti-tumor activity when combined with agents that inhibit the activity of VEGF. These data demonstrating the potential anti-cancer effects of combining ME-344 with a VEGF inhibitor due to an inhibition of both mitochondrial and glycolytic metabolism provided a basis for commencement of an investigator-initiated trial of ME-344 in combination with bevacizumab in HER2 negative breast cancer patients.
Results published in the November 2019 issue of Clinical Cancer Research from a multicenter, investigator-initiated, randomized, open-label, clinical trial that evaluated the combination of ME-344 and bevacizumab in 42 women with early HER2-negative breast cancer further support the combinatorial use of ME-344 with anti-angiogenic therapeutics.
The primary objective of the trial was to show proof of ME-344 biologic activity as measured by Ki67 reductions in the presence of the nuclear protein Ki67 (expression of which is strongly associated with tumor cell proliferation and growth) from days 0 to 28 compared to the
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control group who received bevacizumab alone. Secondary objectives included determining whether ME-344 biologic activity correlates with vascular normalization. The data demonstrate significant biologic activity in the ME-344 treatment group:
Treatment was generally well tolerated; three grade 3 adverse events of high blood pressure were reported, two in the ME-344 arm and one in the bevacizumab monotherapy arm.
Results from our earlier, first-in-human, single-agent Phase 1 clinical trial of ME-344 in patients with refractory solid tumors were published in the April 1, 2015 issue of Cancer. The results indicated that eight of 21 evaluable patients (38%) treated with ME-344 achieved stable disease or better, including five who experienced progression-free survival that was at least twice the duration of their last prior treatment before entry into the trial. In addition, one of these patients, a heavily pre-treated patient with small cell lung cancer, achieved a confirmed partial response and remained on study for two years. ME-344 was generally well tolerated at doses equal to or less than 10 mg/kg delivered on a weekly schedule for extended durations. Treatment-related adverse events included nausea, dizziness and fatigue. Dose-limiting toxicities were observed at both the 15 mg/kg and 20 mg/kg dose levels, consisting primarily of grade 3 peripheral neuropathy. We are planning to advance ME-344 in combination with the anti-angiogenic antibody bevacizumab in a Phase 2 study evaluating patients with relapsed colorectal cancer.
Pracinostat: HDAC Inhibitor Candidate in a Phase 2 Clinical Trial
Pracinostat is an oral HDAC inhibitor being evaluated in a Phase 2 trial in patients with high or very high-risk myelodysplastic syndrome (“MDS”) who are previously untreated with hypomethylating agents (the “POC study”). All patients in the study have completed therapy, the study has closed, and analyses are ongoing in preparation of a final study report.
In August 2016, we entered into an exclusive worldwide license, development, manufacturing and commercialization agreement with Helsinn Healthcare SA, a Swiss pharmaceutical corporation (“Helsinn”) for pracinostat (the “Helsinn License Agreement”) as a treatment for patients with MDS or AML. Under the agreement, Helsinn is primarily responsible for funding global development and commercialization costs for pracinostat. We are responsible for conducting the POC study, the cost of which was shared equally with Helsinn. Any future development and commercialization costs after the completion of the POC study will be the responsibility of Helsinn.
A Phase 3 study evaluating pracinostat in combination with azacitidine in patients with AML who are unfit to receive standard intensive chemotherapy was discontinued by Helsinn, the study sponsor, in July 2020 after an interim futility analysis undertaken by the study Independent Data Monitoring Committee demonstrated it was unlikely to meet the primary endpoint of overall survival compared to the control group. In connection with the discontinuation of the Phase 3 study, the FDA has withdrawn the breakthrough therapy designation previously granted for pracinostat in combination with azacitidine for the treatment of patients with AML. Following the discontinuation of the Phase 3 AML study, Helsinn communicated to us their plan to continue therapy and observation of the patients currently in the Phase 2 MDS study and that further development of pracinostat, including for the treatment of MDS, is under review. The POC study of pracinostat for the treatment of MDS described under “Clinical Program” below was completed in December 2020. There are currently no plans to commence any additional studies for pracinostat.
Pracinostat Scientific Overview; Epigenetics
HDACs play a key role in epigenetic regulation of gene expression by regulating chromatin structure. Acetylation of positively charged lysine residues present in histone proteins by the histone acetyltransferase (“HATs”) reduces the affinity between histones and negatively charged DNA, resulting in the opening of the chromatin structure. This makes it easier for the transcriptional machinery to access the DNA, enhancing RNA transcription. Conversely, deacetylation by the HDACs closes the chromatin structure leading to a repression of gene transcription. In normal cells, HDACs and HATs together control histone acetylation levels to maintain a balance. In diseases such as cancer, this regulation can be disturbed. HDAC inhibitors cause accumulation of acetylated histones, enhance transcription and result in changes to a variety of cellular responses including differentiation, proliferation, migration, survival and response to metabolic and hypoxic stress. In general, tumor cells are more susceptible than normal cells to the anti-proliferative and pro-apoptotic effects of HDAC inhibitors.
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Clinical Program
Pracinostat is being investigated in the POC study, which is a Phase 2 dose optimization trial evaluating patients with high and very high-risk MDS who are previously untreated with hypomethylating agents. All patients in the study have completed therapy and analyses are ongoing in preparation of a final study report. This patient group represents the highest unmet need in MDS, with median survival estimates of 1.6 years and 0.8 years, respectively (Greenberg et al, Blood 2012). The POC Study is an open-label trial evaluating a 45 mg dose of pracinostat in combination with the standard dose of azacitidine. The trial is designed to evaluate tolerability of the combination, with the intent of maintaining patient enrollment longer than in an earlier Phase 2 trial evaluating a 60 mg dose. A prolonged treatment may result in a systemic exposure to pracinostat and azacitidine sufficient to achieve the desired treatment effect; data from the earlier Phase 2 trial suggested that insufficient exposure to treatment may have limited the treatment effect of the combination.
A pre-planned interim analysis of the POC study demonstrated a 10% discontinuation rate among the first 20 evaluable patients treated, meeting the predefined threshold in the first 3 treatment cycles. The 10% rate is consistent with the discontinuation rate for azacitidine given as a monotherapy in earlier studies with pracinostat. Having met this threshold, the trial expanded open-label enrollment to a total of 60 patients in the study. An interim analysis presented at the 2018 American Society of Hematology annual meeting demonstrated a discontinuation rate due to adverse events in the first three cycles of 4%, substantially lower than the rate of 26% reported in our prior Phase 2 trial.
The POC study completed enrollment and patients are being followed for at least two years to evaluate safety and efficacy. The primary endpoints of the trial are 1) safety and tolerability and 2) overall response rate, defined as complete remission (“CR”), partial remission (“PR”) and marrow CR. Secondary endpoints include CR rate, overall hematologic improvement (“HI”) response rate, clinical benefit rate (defined as rate of CR + PR + HI + Marrow CR), rate of cytogenetic complete response/remission, duration of response, rate of leukemic transformation, event-free survival, progression-free survival and overall survival.
Data from the POC study (n=64) presented as part of the ASCO 2020 Virtual Scientific Program in June 2020 demonstrated an estimated median overall survival (“OS”) rate of 23.5 months with a one-year OS rate of 77%. The median follow-up was 17.6 months (range, 15.7–18.8) and the overall response rate (“ORR”) was 33% (21/64), all of which are complete responses (“CR”). The clinical benefit rate (CR, mCR plus hematologic improvement (“HI”), mCR with no HI, or HI with no mCR) was 77% (49/64). Twenty-seven percent of patients (17/64) proceeded to a stem cell transplant while on study. Eleven percent of patients discontinued treatment because of adverse events. The most common grade ≥3 treatment emergent adverse events were hematologic, and included decreased neutrophil count (50%), anemia (39%), febrile neutropenia (34%), decreased platelet count (33%), thrombocytopenia (27%), and decreased white blood cell count (20%). The POC study results have reached maturity leading to closing the study; as of the end of December 2020 no patients are being treated or followed in the study.
Competition
The marketplace for our drug candidates is highly competitive. A number of other companies have products or drug candidates in various stages of pre-clinical or clinical development that are intended for the same therapeutic indications for which our drug candidates are being developed. Some of these potential competing drug candidates are further advanced in development than our drug candidates and may be commercialized sooner. Even if we are successful in developing products that receive regulatory approval, such products may not compete successfully with products produced by our competitors or with products that may subsequently receive regulatory approval.
Our competitors include pharmaceutical companies and biotechnology companies, as well as universities and public and private research institutions. In addition, companies active in different but related fields represent substantial competition for us. Many of our competitors developing oncology drugs have significantly greater capital resources, larger research and development staffs and facilities, and greater experience in drug development, regulation, manufacturing, marketing and commercialization than we do. They compete with us in recruiting sites and eligible patients to participate in clinical studies and in attracting development and/or commercialization partners. They also license technologies that are competitive with our technologies. As a result, our competitors may be able to more easily develop technologies and products that would render our technologies or our drug candidates obsolete or non-competitive.
Intellectual Property
We own, by assignment or exclusive license, worldwide rights to each of our current drug candidates. Our intellectual property portfolio includes approximately 40 issued U.S. patents, 330 issued foreign patents, 20 pending U.S. patent applications, and 165 pending foreign applications.
We have acquired, by assignment, worldwide rights to zandelisib and other related compounds from Pathway Therapeutics, Inc. The U.S. Patent and Trademark Office (“USPTO”) has issued five patents covering zandelisib as composition of matter, pharmaceutical compositions, and methods of use to treat cancer. The issued U.S. patents with composition of matter claims covering zandelisib are projected to expire in January 2031 and December 2032, not including any patent term extension. There are approximately 47 foreign patents granted or
16
allowed. There are eight pending U.S. patent applications, one pending international patent application filed under the Patent Cooperation Treaty (PCT application), and approximately 96 pending foreign patent applications directed to zandelisib and related compounds.
We have acquired exclusive worldwide rights to develop, manufacture and commercialize voruciclib from Presage Biosciences, Inc. (“Presage”). The USPTO has issued three patents covering the composition of matter and pharmaceutical compositions of voruciclib which are projected to expire between April 2024 and September 2028, not including any patent term extension. In total there are currently 17 allowed or issued U.S. patents, 81 allowed or issued foreign patents, five pending U.S. patent applications, and 23 pending foreign patent applications for voruciclib, related compounds, and related methods of use.
We have acquired, by assignment, patents and patent applications from Novogen, our former majority shareholder, relating to a family of isoflavonoid compounds, including ME-344. The USPTO has issued 11 patents covering ME-344 as composition of matter, pharmaceutical compositions, and methods of use to treat cancer. There are approximately 70 foreign patents granted or allowed. The issued U.S. patents with composition of matter claims covering ME-344 are expected to expire in March 2027 and November 2031, not including patent term extension. There are three pending U.S. patent applications, one pending PCT application, and three pending foreign patent applications directed to ME-344 and related compounds.
We have acquired, by assignment, patents and patent applications from S*Bio Pte Ltd (“S*Bio”) relating to a family of heterocyclic compounds, including pracinostat. The USPTO has issued nine patents covering pracinostat as composition of matter, pharmaceutical compositions, and methods of use to treat proliferative diseases. There are approximately 132 foreign granted or allowed patents. The issued U.S. patents with composition of matter claims covering pracinostat are projected to expire in May 2028, not including patent term extension. In the Helsinn License Agreement, we granted to Helsinn an exclusive (subject to certain retained rights to perform obligations under the agreement), sublicensable, payment-bearing, license under and to certain patents and know-how controlled by us to develop, manufacture and commercialize pracinostat and any pharmaceutical product containing pracinostat for all human and animal indications. There are four pending U.S. patent applications and approximately 43 pending foreign patent applications directed to pracinostat and related compounds.
Our success depends in large part on our ability to protect our proprietary technologies, compounds and information, and to operate without infringing the proprietary rights of third parties. We rely on a combination of patent, trade secret, copyright, and trademark laws, as well as confidentiality, licensing and other agreements, to establish and protect our proprietary rights. We seek patent protection for our key inventions, including drug candidates we identify, routes for chemical synthesis and pharmaceutical formulations. There is no assurance that any of our pending patent applications will issue, or that any of our patents will be enforceable or will cover a drug or other commercially significant product or method. In addition, we regularly review our patent portfolio to identify patents and patent applications that we deem to have relatively low value to our ongoing business operations for potential abandonment. There is also no assurance that we will correctly identify which of our patents and patent applications should be maintained and which should be abandoned. The term of most of our other current patents commenced, and most of our future patents, if any, will commence, on the date of issuance and terminate 20 years from the earliest effective filing date of the patent application. Because any marketing and regulatory approval for a drug often occurs several years after the related patent application is filed, the resulting market exclusivity afforded by any patent on our drug candidates and technologies will likely be substantially less than 20 years.
As most patent applications in the U.S. are maintained as confidential until published by the USPTO at 18 months from filing for all cases filed after November 29, 2000, or at issue, for cases filed prior to November 29, 2000, we cannot be certain that we or Presage were the first to make the inventions covered by the patents and applications referred to above. Additionally, publication of discoveries in the scientific or patent literature often lags behind the actual discoveries. Moreover, pursuant to the terms of the Uruguay Round Agreements Act, patents filed on or after June 8, 1995 have a term of twenty years from the date of such filing except for provisional applications, irrespective of the period of time it may take for such patent to ultimately issue. This may shorten the period of patent protection afforded to therapeutic uses of zandelisib, voruciclib, ME-344 or pracinostat as patent applications in the biopharmaceutical sector often take considerable time to issue. However, in some countries the patent term may be extended.
In order to protect the confidentiality of our technology, including trade secrets and know-how and other proprietary technical and business information, we require all of our consultants, advisors and collaborators to enter into agreements that prohibit the use or disclosure of information that is deemed confidential. These agreements also oblige our consultants, advisors and collaborators to assign to us, or negotiate a license to developments, discoveries and inventions made by such persons in connection with their work relating to our products. We cannot be sure that confidentiality will be maintained by those from whom we have acquired technology or disclosure prevented by these agreements. We also cannot be sure that our proprietary information or intellectual property will be protected by these agreements or that others will not independently develop substantially equivalent proprietary information or intellectual property.
The pharmaceutical industry is highly competitive, and patents may have been applied for by, and issued to, other parties relating to products competitive with zandelisib, voruciclib, ME-344 or pracinostat. Use of these compounds and any other drug candidates may give rise to claims that they infringe the patents or proprietary rights of other parties, existing now and in the future. An adverse claim could subject us to significant liabilities to such other parties and/or require disputed rights to be licensed from such other parties. We cannot be sure that any
17
license required under any such patents or proprietary rights would be made available on terms acceptable to us, if at all. If we do not obtain such licenses, we may encounter delays in product market introductions, or may find that the development, manufacture or sale of products requiring such licenses may be precluded.
Research and Development
The objective of our research and development program is the generation of data sufficient to achieve regulatory approval of our drug candidates in one or more dosage forms in major markets such as the U.S., to meet medical needs and develop a clinical and commercial profile with attractive attributes, and/or to allow us to enter into a development and/or commercial relationship with another party. The data are generated by our pre-clinical studies and clinical trial programs.
The key aspects of our research and development program are to provide more complete characterization of the following:
Government Regulation
U.S. Regulatory Requirements
The FDA, and comparable regulatory agencies in other countries, regulate and impose substantial requirements upon the research, development, pre-clinical and clinical testing, labeling, manufacture, quality control, storage, approval, advertising, promotion, marketing, distribution, import, and export of pharmaceutical products including biologics, as well as significant reporting and record-keeping obligations. State governments may also impose obligations in these and other areas.
In the U.S., pharmaceutical products are regulated by the FDA under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and other laws, including in the case of biologics, the Public Health Service Act. We believe, but cannot be certain, that our products will be regulated as drugs by the FDA. The process required by the FDA before drugs may be marketed in the U.S. generally involves the following:
The testing and approval process requires substantial time, effort, and financial resources, and we cannot be certain that any approval will be granted on a timely basis, if at all.
The results of the pre-clinical studies, together with initial specified manufacturing information, the proposed clinical trial protocol, and information about the participating investigators are submitted to the FDA as part of an IND, which must become effective before we may begin human clinical trials in the U.S. Clinical trials must be conducted in accordance with federal regulations and Good Clinical Practice (“GCP”) requirements, and with investigational products that follow cGMP. GCPs include, among other requirements, the requirements related to monitoring, drug accountability, data integrity, and that all research subjects provide their informed consent in writing for their participation in any clinical trial. Additionally, an independent IRB must review and approve each study protocol and oversee conduct of the trial. An IND becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day period, raises concerns or questions about the conduct of the trials as outlined in the IND and imposes a clinical hold. If the FDA imposes a clinical hold, the IND sponsor must resolve the FDA’s concerns before clinical trials can begin. Pre-clinical tests and studies can take several years to complete, and there is no guarantee that an IND we submit based on such tests and studies will become effective within any specific time period, if at all.
Sponsors must make certain reports and submissions to FDA and global health authorities, as appropriate, and to clinical investigators who, in turn, make certain reports and submissions to the IRB or ethics committee, including annual reports, and reports of investigator financial interests, serious adverse events and other significant safety information, study amendments, and new study protocols. Information
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about certain clinical trials, including a description of the study and study results, must also be submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination on the clinicaltrials.gov website. Sponsors of investigational products for serious diseases must also have a publicly available policy on requests for expanded access.
Investigational drugs and active ingredients imported into the United States are also subject to regulation by the FDA. Further, the export of investigational products outside of the United States is subject to regulatory requirements of the receiving country as well as U.S. export requirements under the FDCA.
Human clinical trials are typically conducted in three sequential phases that may overlap.
Concurrent with clinical trials, companies usually complete additional non-clinical and toxicology studies and must also develop additional information about the CMC of the product candidate.
Some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data monitoring committee. This group reviews data and advises the study sponsor regarding the continuing safety of the trial. This group may also review interim data to assess the continuing validity and scientific merit of the clinical trial. The data monitoring committee may advise the sponsor to halt the clinical trial, modify the clinical trial, or continue the clinical trial depending on safety results and the trial’s likelihood of success.
We cannot be certain that we will successfully complete clinical testing of our products within any specific time period, if at all. Furthermore, the FDA, the IRB or we may suspend or terminate clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable safety risk or noncompliance with applicable regulatory requirements.
Results of pre-clinical and toxicology studies, and clinical trials, as well as detailed information about the manufacturing process, quality control methods, and product composition, among other things, are submitted to the FDA as part of an NDA seeking approval to market and commercially distribute the product on the basis of a determination that the product is safe and effective for its intended use. Once the FDA receives an application, it has 60 days to review the NDA to determine if it is substantially complete to permit a substantive review, before it accepts the application for filing. The FDA may request additional information rather than accept an application for filing. In this event, the application must be resubmitted with the additional information. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. Under the goals agreed to by the FDA under the Prescription Drug User Fee Act, (“PDUFA”), the agency currently aims to review 90% of all applications for new molecular entities within ten months of the 60-day filing date for a standard review. The PDUFA date is only a goal, thus, the FDA does not always meet its PDUFA dates. The PDUFA date may also be extended if the FDA requests or the sponsor provides substantial additional information regarding the submission.
The FDA may refer certain applications to an advisory committee, which is a panel of experts that make a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
Before approving an NDA, the FDA will inspect the facilities at which the product is manufactured and may inspect the sponsor, clinical study vendors, and clinical sites at which the product candidate was studied and will not approve the product unless cGMP and GCP compliance are satisfactory. If applicable regulatory criteria are not satisfied, the FDA may issue a complete response letter (“CRL”) to the sponsor requiring additional non-clinical or clinical studies or data or additional CMC information. If a CRL is issued, the applicant may either: resubmit the marketing application, addressing all of the deficiencies identified in the letter; withdraw the application; or request an opportunity for a hearing.
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Once the FDA determines that the approval requirements are met, it will issue an approval letter that authorizes commercial marketing of the product with specific prescribing information for specific indications. As a condition of approval, the FDA also may require post-marketing commitments and requirements, including studies, and/or surveillance to monitor the product’s safety or efficacy. The FDA also may require a Medication Guide and also a risk evaluation and mitigation strategy ("REMS"), or other conditions for a product's approval or following approval to ensure that the benefits of the product candidate outweigh the risks. Moreover, even if the FDA approves a product, it may limit the approved indications or populations for use of the product, require that contraindications, warnings, or precautions be included in the product labeling, including a black box warning, impose other conditions, such as post-approval studies, or may not approve label statements that are necessary for successful commercialization and marketing.
Even after an NDA is approved, the FDA may impose additional obligations or restrictions (such as labeling changes, or clinical post-marketing requirements), or even suspend or withdraw a product approval or require additional testing or label revisions on the basis of data that arise after the product reaches the market, or if compliance with regulatory standards is not maintained. We cannot be certain that any NDA we submit will be approved by the FDA for full or accelerated approval on a timely basis, if at all. Also, any such approval may limit the indicated uses for which the product may be marketed. Any refusal to approve, delay in approval, suspension or withdrawal of approval, or restrictions on indicated uses could have a material adverse impact on our business prospects.
Each NDA must be accompanied by a substantial user fee pursuant to the requirements of the PDUFA and its amendments. Fee waivers or reductions are available in certain circumstances. Following product approval, drug products are also subject to annual program fees. The FDA adjusts the PDUFA user fees on an annual basis. A written request can be submitted for a waiver for the application fee for the first human drug application that is filed by a small business, but there are no small business waivers for program fees. Product candidates that are designated as orphan products are not subject to application user fees unless the application includes an indication other than the orphan indication and may be exempt from program fees if certain criteria are met. We are not at the stage of development with our products where we are subject to these fees, but they are significant expenditures that may be incurred in the future and must be paid at the time of application submissions to the FDA.
Satisfaction of FDA requirements typically takes many years. The actual time required varies substantially, based upon the type, complexity, and novelty of the pharmaceutical product, among other things. Government regulation imposes costly and time-consuming requirements and restrictions throughout the product life cycle and may delay product marketing for a considerable period of time, limit product marketing, or prevent marketing altogether. Success in pre-clinical or early stage clinical trials does not ensure success in later stage clinical trials. Data obtained from pre-clinical and clinical activities are not always conclusive and may be susceptible to varying interpretations that could delay, limit, or prevent marketing approval. Even if a product receives marketing approval, the approval is limited to specific clinical indications. Further, even after marketing approval is obtained, the discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market.
After product approval, there are continuing significant regulatory requirements imposed by the FDA, including record-keeping requirements, obligations to report adverse side effects in patients using the products, and restrictions on advertising and promotional activities. Quality control and manufacturing procedures must continue to conform to cGMPs, and the FDA periodically inspects facilities to assess cGMP compliance. Additionally, post-approval changes in ingredient composition, manufacturing processes or facilities, product labeling, or other areas may require submission of an NDA Supplement to the FDA for review and approval. New indications will require additional clinical studies and submission of an NDA Supplement.
Failure to comply with the FDA's regulatory requirements may result in an enforcement action by the FDA, including clinical holds, refusal to approve marketing applications or supplements, Warning Letters, product recalls, suspension or revocation of product approval, seizure of product to prevent distribution, impositions of injunctions prohibiting product manufacture or distribution, and civil and criminal penalties, among other actions. Maintaining compliance is costly and time-consuming. We cannot be certain that we, or our present or future suppliers or third-party manufacturers, will be able to comply with all FDA regulatory requirements, and potential consequences of noncompliance could have a material adverse impact on our business prospects.
The FDA’s policies may change, and additional governmental regulations may be enacted that could delay, limit, or prevent regulatory approval of our products or affect our ability to manufacture, market, or distribute our products after approval. Moreover, increased attention to the containment of healthcare costs in the U.S. and in foreign markets could result in new government regulations that could have a material adverse effect on our business. Our ability to commercialize future products will depend in part on the extent to which coverage and reimbursement for the products will be available from government and health administration authorities, private health insurers, and other third-party payers. European Union member states and U.S. government and other third-party payers increasingly are attempting to contain healthcare costs by consideration of new laws and regulations limiting both coverage and the level of reimbursement for new drugs. Our failure to obtain coverage, an adequate level of reimbursement, or acceptable prices for our future products could diminish any revenues we may be able to generate. We cannot predict the likelihood, nature or extent of adverse governmental regulation that might arise from future legislative or administrative action, either in the U.S. or abroad.
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Our activities also may be subject to state laws and regulations that affect our ability to develop and sell our products. We are also subject to numerous federal, state, and local laws relating to such matters as safe working conditions, clinical, laboratory, and manufacturing practices, environmental protection, fire hazard control, and disposal of hazardous or potentially hazardous substances. We may incur significant costs to comply with such laws and regulations now or in the future, and the failure to comply may have a material adverse impact on our business prospects.
The FDCA includes provisions designed to facilitate the development and expedite the review of drugs and biological products intended for treatment of serious or life-threatening conditions that demonstrate the potential to address unmet medical needs for such conditions or present a significant improvement over existing therapy. These provisions set forth a procedure for designation of a drug as a “fast track product”. The fast track designation applies to the combination of the product and specific indication for which it is being studied. A product designated as fast track is ordinarily eligible for additional programs for expediting development and review, such as increased FDA interactions and rolling submission of the application.
Products that are intended to treat serious or life-threatening conditions and that provide a meaningful therapeutic benefit over existing treatments may also be eligible for accelerated approval. Drug approval under the accelerated approval regulations may be based on evidence of clinical effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. A post-marketing clinical study will be required to verify clinical benefit, and other restrictions to assure safe use may be imposed. Failure to conduct required post-approval studies, or confirm a clinical benefit, will allow the FDA to withdraw the drug or biologic from the market on an expedited basis.
A third potential designation that may be available is breakthrough therapy designation. A breakthrough therapy is a product that is intended, alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. Products designated as breakthrough therapies are eligible for intensive FDA guidance, a commitment from the FDA to involve senior managers and experienced review staff in a proactive collaborative and cross-disciplinary review, rolling submission of the application, and the facilitation of cross-disciplinary review.
Finally, if a product is intended to treat a serious condition and, if approved, would provide significant improvements in the safety or effectiveness of the treatment, diagnosis, or prevention of the condition, the product may be eligible for priority review meaning that FDA’s goal for the review of an NDA is shortened to six months (after a two month period during which the FDA decides whether the application is ready for filing) rather than the standard review of ten months from application acceptance. Currently, we have fast track designation for one of our clinical programs (zandelisib for patients with relapsed follicular lymphoma who have received at least two prior systemic therapies). If we should seek additional designations for any of our programs, we cannot be assured that it will be granted by the FDA. There is also no guarantee that we will be able to maintain any designation that we have received or may receive.
Following the FDA's approval of an NDA, sponsors are required to list with the FDA each patent with claims that cover the applicant’s drug or a method of using the drug. These patents are published in the FDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can be cited by potential competitors as a reference listed drug in support of a 505(b)(2) NDA or an Abbreviated New Drug Application, (“ANDA”). In an effort to clarify which patents must be listed in the Orange Book, in January 2021, Congress passed the Orange Book Transparency Act of 2020, which largely codifies FDA's existing practices into the FDCA.
A 505(b)(2) NDA is an application that contains full reports of investigations of safety and efficacy but where at least some of the information required for approval comes from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted. This regulatory pathway enables the applicant to rely, in part, on the FDA’s prior findings of safety and efficacy for an existing product, or published literature. An ANDA provides for marketing of a generic drug product that has the same active ingredients, dosage form, strength, route of administration, labeling, performance characteristics and intended use as a previously approved product. ANDA applicants generally must only scientifically demonstrate that their product is bioequivalent to, or performs in the same manner as, the innovator drug and can often be substituted by pharmacists under prescriptions written for the reference listed drug.
Generally, the FDA may not approve an ANDA or 505(b)(2) NDA unless the reference listed drug’s Orange Book listed patents have expired and/or if the applicant certifies that it is not seeking approval for a patented method of use. FDA may approve these applications, however, if the 505(b)(2) NDA or ANDA sponsor certifies that the Orange Book listed patents for the reference listed drug are invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. This later certification is called a paragraph IV certification. If the ANDA or 505(b)(2) NDA applicant has made a paragraph IV certification, following notice to the NDA and patent holders, the NDA and patent holders may then initiate a patent infringement lawsuit. If a lawsuit is brought, the FDA may not make an approval effective until the earlier of 30 months from the patent or application owner’s receipt of the notice of the paragraph IV certification, the expiration of the patent, when the infringement case concerning each such patent is favorably decided in the applicant’s favor or settled, or such shorter or longer period as may be ordered by a court.
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Recently, Congress and U.S. federal administrative agencies have taken certain measures to increase drug competition and thus decrease drug prices, including by facilitating 505(b)(2) NDAs and ANDAs, and by introducing additional products into the U.S. market. By example, the FDA finalized a rule and a guidance to facilitate drug importation. Congress also passed a bill requiring sponsors of NDA products to provide sufficient quantities of drug product on commercially reasonable market-based terms to entities developing generic and 505(b)(2) products. This bill also included provisions on shared and individual REMS for generic drug products.
Under the Drug Price Competition and Patent Term Restoration Act of 1984, a sponsor may obtain marketing exclusivity for a specified period of time following FDA approval of certain drug applications. By example, new drugs containing new chemical entities that have not been previously approved by the FDA may obtain five years of exclusivity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the therapeutic activity of the drug substance. During the exclusivity period, the FDA may not accept for review an ANDA or a 505(b)(2) NDA submitted by another company that contains the previously approved active moiety. However, an ANDA or 505(b)(2) NDA may be submitted after four years if it contains a paragraph IV certification. This exclusivity is not absolute. For instance, it will not delay the submission or approval of a full NDA; though, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and efficacy.
Following NDA approval, a patent owner may obtain an extension of a single unexpired patent that has not previously been extended for a period equal to one-half the period of time elapsed between the filing of an IND and the filing of the corresponding NDA plus the period of time between the filing of the NDA and FDA approval, with a five year maximum patent extension. The total patent life of the product with the extension cannot exceed fourteen years from the product’s approval date. The period of patent extension may also be reduced for any time that the applicant did not act with due diligence. We cannot be certain that we will be able to take advantage of either the patent term extension or marketing exclusivity provisions of these laws or that, if received, they will adequately protect any approved products from competition.
The Best Pharmaceuticals for Children Act (“BPCA”), signed into law on January 4, 2002, was reauthorized and amended by the FDA Amendments Act of 2007 (“FDAAA”). The reauthorization of BPCA adds an additional six months of marketing exclusivity and patent protection to unexpired exclusivities and unexpired patents listed with the FDA for NDA applicants that conduct acceptable pediatric studies of new and currently marketed drug products for which pediatric information would be beneficial, as identified by the FDA in a Pediatric Written Request. The data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly address the agreement between the sponsor and the FDA in the Pediatric Written Request, the additional protection is granted.
The Pediatric Research Equity Act (“PREA”), signed into law on December 3, 2003, also was reauthorized and amended by the FDAAA. The reauthorization of PREA requires that most applications for drugs and biologics include a pediatric assessment (unless waived or deferred) to ensure the drugs’ and biologics’ safety and effectiveness in children. Such pediatric assessment must contain data, gathered using appropriate formulations for each age group for which the assessment is required, that are adequate to assess the safety and effectiveness of the drug or the biological product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the drug or the biological product is safe and effective. The pediatric assessments can only be deferred provided there is a timeline for the completion of such studies. The FDA may waive (partially or fully) the pediatric assessment requirement for several reasons, including if the applicant can demonstrate that reasonable attempts to produce a pediatric formulation necessary for that age group have failed. Orphan products are also exempt from the PREA requirements. The Food and Drug Administration Safety and Innovation Act signed into law on July 9, 2012, permanently renewed and strengthened BPCA and PREA.
Under the FDA Reauthorization Act of 2017, sponsors submitting original applications on or after August 18, 2020, for product candidates intended for the treatment of adult cancer which are directed at molecular targets that the FDA determines to be substantially relevant to the growth or progression of pediatric cancer must submit, prior to marketing application submission, submit an initial Pediatric Study Plan ("iPSP") for FDA agreement, and with the application, reports from molecularly targeted pediatric cancer clinical investigations designed to yield clinically meaningful pediatric study data, using appropriate pediatric formulations, to inform potential pediatric labeling. While orphan products are not exempt from this requirement, the FDA may grant full or partial waivers, or deferrals, for submission of data.
Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a “rare disease or condition,” which generally is a disease or condition that affects fewer than 200,000 individuals in the U.S. Additionally, sponsors must present a plausible hypothesis for clinical superiority to obtain orphan drug designation if there is a product already approved by the FDA that is considered by the FDA to be the same as the already approved product and is intended for the same indication. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. Orphan drug designation does, however, entitle a party to financial incentives such as opportunities for grant funding towards clinical study costs, tax advantages, and certain user-fee waivers. The tax advantages, however, were limited in the 2017 Tax Cuts and Jobs Act. If a product which has an orphan drug designation subsequently receives the first FDA approval for the indication for which it has such designation, the product is entitled to orphan exclusivity, i.e., the FDA may not approve any other applications to market the same drug for the same indication for a period of seven years, except in limited circumstances. If there is already a product approved by FDA that is the same product for the same indication, the orphan designated product will only receive orphan drug exclusivity if the prior hypothesis of clinical superiority is demonstrated.
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Foreign Regulatory Requirements
Outside the U.S., our ability to market our products will also be contingent upon receiving marketing authorizations from the appropriate regulatory authorities and compliance with applicable post-approval regulatory requirements. Although the specific requirements and restrictions vary from country to country, as a general matter, foreign regulatory systems include risks similar to those associated with FDA's regulations, described above.
Under European Union regulatory systems, marketing authorizations may be submitted either under a centralized or a decentralized procedure (“DCP”). Under the centralized procedure, a single application to the EMA leads to an approval granted by the European Commission which permits the marketing of the product throughout the EU. The centralized procedure is mandatory for certain classes of medicinal products such as new substances for the treatment of oncology. In addition, all medicinal products developed by certain biotechnological means, and those developed for cancer and other specified diseases and disorders, must be authorized via the centralized procedure. The centralized procedure will apply to any of our products that are developed by means of a biotechnology process or are intended for treatment of cancer. The DCP is used for products that are not eligible or required to be authorized by the centralized procedure. The centralized procedure is optional for certain other products. Since the exit of the UK from the European Union, the UK has been excluded from the centralized procedure. It will be necessary for applicants to make a separate application to the UK Medicines and Healthcare products Regulatory Agency ("MHRA") for a UK marketing authorization. There is currently no procedure for mutual EU/UK recognition of new medicinal products.
As with FDA approval, we may not be able to secure regulatory approvals in the EU in a timely manner, if at all. Additionally, as in the U.S., post-approval regulatory requirements, such as those regarding product manufacture, marketing, or distribution, would apply to any product that is approved in the EU, and failure to comply with such obligations could have a material adverse effect on our ability to successfully commercialize any product.
The conduct of clinical trials in the European Union is governed by the European Clinical Trials Directive ("CTD"), which was implemented in May 2004. This Directive governs how regulatory bodies in member states control clinical trials. No clinical trial may be started without a clinical trial authorization granted by the national competent authority and favorable ethics approval. New legislation to revise and replace the European Clinical Trials Directive (the Clinical Trials Regulation/"CTR") has been passed but is not yet implemented (currently estimated for 31 January 2022). With the exit of the UK from the European Union, the UK will not be implementing the CTR and the UK provisions implementing the current law as set out in the CTD will continue to apply until amended by the UK.
Accordingly, there is a marked degree of change and uncertainty both in the regulation of clinical trials and in respect of marketing authorizations which we face for our products in the EU.
Manufacturing
We do not have the facilities or capabilities to commercially manufacture any of our drug candidates. We are and expect to continue to be dependent on contract manufacturers for supplying our existing and future candidates for clinical trials and commercial scale manufacturing of our candidates in accordance with regulatory requirements, including cGMP. Contract manufacturers may utilize their own technology, technology developed by us, or technology acquired or licensed from third parties. FDA approval of the manufacturing procedures and the site will be required prior to commercial distribution.
Human Capital Management
As of June 30, 2021, we had 76 employees, 18 of whom hold a Ph.D. or M.D. degree. Other personnel resources are used from time to time as consultants or third-party service organizations on an as-needed basis. All members of our senior management team have prior experience with pharmaceutical, biotechnology or medical product companies. We believe that we have been successful in attracting skilled and experienced personnel, but there can be no assurance that we will be able to attract and retain the individuals needed.
Our people are a critical component in our continued success. We strive to create a workplace of choice to attract, retain and develop top talent to achieve our strategic goals. We strive to maximize the potential of our human capital resources by creating a respectful, rewarding, and inclusive work environment that enables our employees to further our mission. We adhere to a philosophy that includes, among other things, commitments to create ongoing job opportunities, pay fair wages, and protect worker health and safety.
We invest in our workforce by offering competitive salaries and benefits. We endeavor to foster a strong sense of ownership by offering stock options under our equity incentive plan. We also offer comprehensive and locally relevant benefits for all eligible employees.
We focus on our culture through a combination of regular training for employees at all levels, policies and practices in support of these goals, and a variety of internal and community-based events and actions that reinforce the power of our values and the unique characteristics of each of our employees.
We have implemented COVID-19 policies designed to ensure the safety and well-being of all employees and the people associated with them. As a result of the COVID-19 pandemic, to reduce risk, our employees have been asked to work remotely, and all employees have been asked to avoid all non-essential travel, adhere to good hygiene practices, and engage in physical distancing.
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None of our employees are represented by a labor union or covered by collective bargaining agreements. We have never experienced a work stoppage and believe our relationship with our employees is good. Management considers its relations with employees to generally be positive.
Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed with or furnished to the Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge through our website at www.meipharma.com as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission.
Item 1A. Risk Factors
Investment in our securities involves a high degree of risk. You should consider carefully the risks described below, together with other information in this Amended Annual Report and other public filings, before making investment decisions regarding our securities. If any of the following events actually occur, our business, operating results, prospects or financial condition could be materially and adversely affected. This could cause the trading price of our common stock to decline and you may lose all or part of your investment. Moreover, the risks described below are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also affect our business, operating results, prospects or financial condition.
Summary Risk Factors
Our business is subject to numerous risks and uncertainties that you should consider before investing in our common stock. Set forth below is a summary of the principal risks we face:
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Risks Related to Our Business
Risks Related to Our Development Stage
We will need substantial additional funds to progress the clinical trial program for our drug candidates, and to develop new compounds. The actual amount of funds we will need will be determined by a number of factors, some of which are beyond our control.
We will need substantial additional funds to progress the clinical trial program for our drug candidates and to develop any additional compounds. The factors that will determine the actual amount of funds that we will need to progress the clinical trial programs may include, but are not limited to, the following:
We have been opportunistic in our efforts to obtain cash, and we expect to continue to evaluate various funding alternatives from time to time. If we obtain additional funding, it may adversely affect the market price of our common stock and may be dilutive to existing stockholders. If we are unable to obtain additional funds on favorable terms or at all, we may be required to cease or reduce our operations. We may sell additional shares of common stock, and securities exercisable for or convertible into shares of our common stock, or we may seek to obtain debt financing, in each case, to satisfy our capital and operating needs; however, such transactions will be subject to market conditions and there can be no assurance any such transactions will be completed.
We are a clinical research and development stage company and are likely to incur operating losses for the foreseeable future.
You should consider our prospects in light of the risks and difficulties frequently encountered by clinical research stage and developmental companies. We have incurred net losses of $319.7 million from our inception through June 30, 2021, including a net loss of $59.4 million for the year ended June 30, 2021 (excluding $18.1 million of non-cash gain resulting from a change in fair value of our warrant liability), a net loss of $24.3 million for the year ended June 30, 2020 (excluding $22.9 million of non-cash expense resulting from a change in fair value of our warrant liability), and a net loss of $44.5 million for the year ended June 30, 2019 (excluding $27.6 million of non-cash income resulting from a change in the fair value of our warrant liability). We anticipate that we will incur operating losses and negative operating cash flow for the foreseeable future. We have not yet commercialized any drug candidates and cannot be sure that we will ever be able to do so, or that we may ever become profitable.
Risks Related to Our Clinical Trials
The results of pre-clinical studies and completed clinical trials are not necessarily predictive of future results, and our current drug candidates may not have favorable results in later studies or trials.
Pre-clinical studies and Phase 1 and Phase 2 clinical trials are an expensive and uncertain process that may take years to complete. Pre-clinical studies and Phase 1 and Phase 2 clinical trials are usually not primarily designed to test the efficacy of a drug candidate, but rather to test safety, to study pharmacokinetics and pharmacodynamics, and to understand the drug candidate’s side effects at various doses and schedules. Favorable results in early studies or trials, as well as small studies or trials, may not be repeated in later studies or trials, including ongoing pre-clinical studies, large-scale Phase 3 clinical trials, or other studies intended as registration trials, and our drug candidates in later-stage trials may fail to show desired safety and efficacy despite having progressed through earlier-stage trials. Interim and top-line results, as well as any results from post-hoc data analyses, may also not be predictive of the final results of a clinical study and/or may not support product approval. The FDA also generally does not accept post-hoc data analyses as support for regulatory approval.
In July 2020, we announced the discontinuation of the Phase 3 study conducted by Helsinn with respect to the use of pracinostat for the treatment of AML because of the failure to meet the primary endpoint of the study, despite prior encouraging results in our earlier Phase 1 and
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Phase 2 clinical trials. The results of the Phase 3 pracinostat study for the treatment of AML may also impact the interpretation of the results from our pracinostat study for MDS. Moreover, comparisons of results across different studies should be viewed with caution as such comparisons are limited by a number of factors, including differences in study designs and populations. Such comparisons also will not provide a sufficient basis for any comparative claims following product approval. Unfavorable results from ongoing pre-clinical studies or clinical trials could result in delays, modifications or abandonment of ongoing or future clinical trials, or abandonment of a clinical program. Pre-clinical and clinical results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals or commercialization. Negative or inconclusive results or adverse medical events during a clinical trial could cause a clinical trial to be delayed, repeated or terminated, or a clinical program to be abandoned.
The outbreak of the novel coronavirus disease, COVID-19, or other pandemic, epidemic or outbreak of an infectious disease may materially and adversely impact our business, including our preclinical studies and clinical trials.
In December 2019, the novel coronavirus disease, COVID-19, was identified in Wuhan, China. This virus has been declared a pandemic and has spread to multiple global regions. The outbreak and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. In response to the COVID-19 outbreak, “shelter in place” orders and other public health guidance measures were implemented across much of the United States, Europe and Asia, including in the locations of our offices, clinical trial sites, key vendors and partners. Although some of such orders have been lifted in certain geographic locations, such measures may be, and, in some cases, have been re-implemented due an increase in the number of positive cases of COVID-19 or severity thereof, including cases attributable to new variants. These restrictions, as well as government restrictions on travel and a lack of public confidence in the safety of air travel and the use of public transportation have reduced and may continue to reduce the willingness of patients to participate in our clinical trials and the ability of regulatory officials and clinical monitors to perform visits of our clinical trial locations. As a result, our clinical development program timelines have been and may continue to be negatively affected by COVID-19, which could materially and adversely affect our business, financial condition and results of operations. Despite the vaccination of a large portion of the U.S. adult population, a significant portion of the global adult population remains unvaccinated and effective vaccines for children have not yet been developed or approved. The ineffectiveness of vaccines or public perception thereof, including in combating the “delta” variant or new variants of the virus, could lead to increased governmental restrictions and changes in public behavior adversely affecting the economy. Further, due to “shelter in place” orders and other public health guidance measures, we have implemented a work-from-home policy for all staff members excluding those necessary to maintain minimum basic operations. Our increased reliance on personnel working from home may negatively impact productivity, or disrupt, delay or otherwise adversely impact our business.
As a result of the COVID-19 outbreak, or similar pandemics, and related “shelter in place” orders and other public health guidance measures, we have experienced disruptions that have materially and adversely impacted our clinical trials, including delays in patient enrollment. We may in the future experience disruptions that could materially and adversely impact our clinical trials, business, financial condition and results of operations, including:
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The foregoing may require that we consult with relevant review and ethics committees, IRBs, and the FDA. The foregoing may also impact the integrity of our study data. The effects of the COVID-19 pandemic may also increase the need for clinical trial patient monitoring and regulatory reporting of adverse effects.
The COVID-19 pandemic and the governmental response continues to rapidly evolve. In light of the COVID-19 outbreak, the FDA has issued a number of new guidance documents, including guidance related to the potential effect of the COVID-19 outbreak on many clinical trial programs. The FDA also issued guidance on additional steps that are required to maintain GMPs during the pandemic in addition to a number of other COVID-19 related guidance.
The extent to which the outbreak impacts our business, preclinical studies and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence. If we or any of the third parties with whom we engage were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted.
Changes in drug candidate manufacturing or formulation may result in additional costs or delay.
As drug candidates are developed through preclinical studies to late-stage clinical trials toward approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods, manufacturing sites, formulation, and methods of delivery are altered along the way in an effort to optimize processes and results. Any of these changes could cause our drug candidates to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the altered materials. Such changes may also require additional studies to demonstrate the comparability of the product candidate using prior processes, formulation, or manufacturers, FDA notification, or FDA approval. Any of the foregoing could limit our future revenues and growth.
Risks Related to Our Licensing and Collaboration Agreements
If KKC or other parties with whom we collaborate on the development and commercialization of our drug candidates do not satisfy their obligations, do not otherwise pursue development or commercialization of our drug candidates or if they terminate their agreements with us, we may not be able to develop or commercialize our drug candidates.
In April 2020, we entered into an agreement with KKC to collaborate on the development, manufacturing, and commercialization of zandelisib globally. The agreement substantially retains and consolidates the terms of the 2018 agreement with KKC to develop and commercialize in Japan. We may enter into additional agreements to collaborate with other third parties on the development, manufacturing or commercialization of our drug candidates in the future. In connection with these agreements, we may grant certain rights regarding the use of our patents and technology. The counterparties may be responsible for development, manufacturing or commercialization of our drug candidates and the costs related thereto.
Our counterparties might not fulfill all of their obligations to us. In addition, the agreements with our counterparties provide the counterparties with substantial control of the development and commercialization of our drug candidates and discretion whether to devote resources to the full pursuit thereof. or otherwise fail to fully pursue the development and commercialization of our drug candidates Even without breaching their obligations to us, our counterparties may not devote adequate resources or otherwise pursue the development and commercialization of our drug candidates, whether as a result of their assessment of the likelihood of success of such efforts, for financial reasons or otherwise. Our ability to receive revenue from our drug candidates may be dependent upon their efforts. If they fail to devote adequate resources or otherwise do not successfully develop, commercialize or manufacture our drug candidates, we may not receive the future milestone payments or royalties provided for in the agreement. In addition, under certain circumstances, including our failure to satisfy our obligations under the agreement, the counterparty may have the right to terminate the agreement.
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We could also become involved in disputes with our counterparties, which could lead to delays in or termination of the agreement and time-consuming and expensive litigation or arbitration.
If our counterparties are unwilling or unable to fulfill their obligations or otherwise fail to fully pursue the development and commercialization of our drug candidates or if the agreement is terminated, we may lack sufficient resources to develop and commercialize our drug candidates on our own and may be unable to reach agreement with a suitable alternative collaborator. The failure to develop and commercialize our drug candidates would have a material adverse effect on our business, operating results, prospects and financial condition.
We are subject to significant obligations to Presage in connection with our license of voruciclib, and we may become subject to significant obligations in connection with future licenses we obtain, which could adversely affect the overall profitability of any products we may seek to commercialize, and such licenses of drug candidates, the development and commercialization for which we are solely responsible, may never become profitable.
In September 2017, we entered into a license agreement with Presage (“the Presage License Agreement”). Under the terms of the agreement, Presage granted us exclusive worldwide rights to develop, manufacture and commercialize voruciclib, a clinical-stage, oral and selective CDK inhibitor, and related compounds. In exchange, we paid Presage $2.9 million and are obligated for additional potential payments of up to $181 million upon the achievement of certain development, regulatory and commercial milestones. We will also pay mid-single-digit tiered royalties on the net sales of any product successfully developed pursuant to such agreement. We may enter into similar agreements in the future that require us to make significant payments upon obtainment of development, regulatory or commercial milestones. We may be obligated to make milestone or royalty payments when we do not have the cash on hand to make these payments or have available cash for our other development efforts. These milestone and royalty payments could adversely affect the overall profitability for us of any products that we may seek to commercialize. In addition, if we fail to comply with our obligations under the license agreement, the counterparty may have the right to terminate the agreement. In such a case, we would lose our rights to the intellectual property covered by the license agreement and we would not be able to develop, manufacture or commercialize our drug candidates.
The profitability of our license agreement with Presage depends on the successful development, regulatory approval and commercialization of voruciclib. We are solely responsible for the development and commercialization of voruciclib, including the related costs. Drug development is a long, expensive and uncertain process and delay or failure can occur at any stage of our clinical trials. We cannot be certain that we will ever receive regulatory approval for voruciclib or that it will be successfully commercialized, even if approved.
Our business strategy may include entry into additional collaborative or license agreements. We may not be able to enter into collaborative or license agreements or may not be able to negotiate commercially acceptable terms for these agreements.
Our current business strategy may include the entry into additional collaborative or license agreements for the development and commercialization of our drug and drug candidates. The negotiation and consummation of these types of agreements typically involve simultaneous discussions with multiple potential collaborators or licensees and require significant time and resources. In addition, in attracting the attention of pharmaceutical and biotechnology company collaborators or licensees, we compete with numerous other third parties with product opportunities as well as the collaborators’ or licensees’ own internal product opportunities. We may not be able to consummate collaborative or license agreements, or we may not be able to negotiate commercially acceptable terms for these agreements.
If we do enter into such arrangements, we could be dependent upon the subsequent success of these other parties in performing their respective responsibilities and the cooperation of our partners. Our collaborators may not cooperate with us or perform their obligations under our agreements with them. We cannot control the amount and timing of our collaborators’ resources that will be devoted to researching our product candidates pursuant to our collaborative agreements with them or whether our collaborators will comply with the applicable regulatory requirements. Our collaborators may choose to pursue existing or alternative technologies in preference to those being developed in collaboration with us.
Under agreements with any collaborators or licensees we may work with in the future, we may rely significantly on them to, among other activities:
If we do not consummate collaborative or license agreements, we may use our financial resources more rapidly on our drug development efforts, continue to defer certain development activities or forego the exploitation of certain geographic territories, any of which could have a material adverse effect on our business prospects. Further, we may not be successful in overseeing any such collaborative arrangements. If we fail to establish and maintain necessary collaborative or license relationships, our business prospects could suffer.
Collaboration agreements may not lead to development or commercialization of drug candidates in the most efficient manner, or at all. If any collaborations we might enter into do not result in the successful development and commercialization of drug candidates or if one of our
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collaborators subsequently terminates its agreement with us, we may not receive any future research funding or milestone or royalty payments under the collaboration. If we do not receive the funding we expect under the agreements, our development of our drug candidates could be delayed, and we may need additional resources to develop our drug candidates and our product platform. All of the risks relating to product development, regulatory approval and commercialization described in this Amended Annual Report also apply to the activities of our collaborators. Moreover, should our collaborators not comply with the applicable regulatory or legal requirements, we and/or they, may be subject to regulatory enforcement action.
Risks Related to FDA and Non-U.S. Regulation
Final approval by regulatory authorities of our drug candidates for commercial use may be delayed, limited or prevented, any of which would adversely affect our ability to generate operating revenues.
We will not generate any operating revenue until we, a licensee, or a potential collaborator successfully commercialize one of our drug candidates. Currently, we have drug candidates at different stages of development, and each will need to successfully complete certain clinical studies and obtain regulatory approval before potential commercialization. We may experience unforeseen events during product development that may substantially delay or prevent product approval. For example, the FDA may order the temporary, or permanent, discontinuation of a clinical trial at any time if it believes that the clinical trial either is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB’s requirements or if the trial poses an unexpected serious harm to clinical trial patients. The FDA or an IRB may also impose conditions on the conduct of a clinical trial. Clinical trial sponsors may also choose to discontinue clinical trials as a result of risks to clinical trial patients, a lack of favorable results, or changing business priorities.
The pre-clinical and clinical development, manufacturing, labeling, packaging, storage, recordkeeping, export, marketing and distribution, and other possible activities relating to our drug candidates are subject to extensive regulation by the FDA and other regulatory agencies. Failure to comply with applicable regulatory requirements may, either before or after product approval, subject us to administrative or judicially imposed sanctions that may negatively impact the approval of one or more of our drug candidates or otherwise negatively impact our business.
Neither collaborators, licensees nor we are permitted to market a drug candidate in the United States until the particular drug candidate is approved for marketing by the FDA. Specific pre-clinical data, chemistry, manufacturing and controls data, a proposed clinical trial protocol and other information must be submitted to the FDA as part of an IND application, and clinical trials may commence only after the IND application becomes effective. To market a new drug in the United States, we must submit to the FDA and obtain FDA approval of an NDA. An NDA must be supported by extensive clinical and pre-clinical data, as well as extensive information regarding chemistry, manufacturing and controls to demonstrate the safety and effectiveness of the drug candidate.
Obtaining approval of an NDA can be a lengthy, expensive and uncertain process. Regulatory approval of an NDA is not guaranteed. The number and types of pre-clinical studies and clinical trials that will be required for FDA approval varies depending on the drug candidate, the disease or condition that the drug candidate is designed to target and the regulations applicable to any particular drug candidate. The FDA may also require additional studies or data after a trial has begun or more studies or data than we otherwise have anticipated. For example, we are conducting a multi-arm, open-label, Phase 1b dose finding and expansion trial evaluating zandelisib as a monotherapy and in combination with other therapies in patients with relapsed or refractory B-cell malignancies. Despite the time and expense exerted in pre-clinical and clinical studies, failure can occur at any stage, and we could encounter problems that delay our product candidate development, trigger additional requirements from the FDA, or that cause us to abandon clinical trials or to repeat or perform additional pre-clinical studies and clinical trials. The FDA can delay, limit or deny approval of a drug candidate for many reasons, and product candidate development programs may be delayed or may not be successful for many reasons including but not limited to, the following:
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Our pre-clinical and clinical data, other information and procedures relating to a drug candidate may not be sufficient to support approval by the FDA or any other U.S. or foreign regulatory authority, or regulatory interpretation of these data and procedures may be unfavorable. Our efforts to take advantage of expedited regulatory pathways for serious or life-threatening illnesses, such as accelerated approval, to secure marketing authorization more quickly may not be successful. We cannot be certain that any NDA we submit will be approved by the FDA for full or accelerated approval on a timely basis, if at all. Securing accelerated approval requires demonstrating a meaningful therapeutic benefit over available existing treatments. Accelerated approvals are based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. If approved, the FDA will require post-marketing studies to verify clinical benefit. Failure to conduct required post-approval studies, or confirm a clinical benefit, will allow the FDA to withdraw the drug from the market on an expedited basis. We plan to seek FDA marketing approval of zandelisib via the accelerated approval pathway, based on the results of our ongoing phase 2 clinical trial. The FDA, however, may not agree that the accelerated approval pathway is appropriate, may disagree with our chosen surrogate endpoints, or may find that the accelerated approval criteria are not met. Should the FDA disagree with our approach, we would be required to conduct additional clinical studies prior to submitting an NDA and prior to the FDA granting marketing approval. Should we receive accelerated approval for zandelisib, the FDA-approved label will indicate that the clinical benefit of the product has not been established and that continued approval is contingent upon verification of a clinical benefit in confirmatory trials.
Our business and reputation may be harmed by any failure or significant delay in receiving regulatory approval for the sale of any drugs resulting from our drug candidates. As a result, we cannot predict when or whether regulatory approval will be obtained for any drug we develop. Additionally, other factors may serve to delay, limit or prevent the final approval by regulatory authorities of our drug candidates for commercial use, including, but not limited to:
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Significant delays relating to any preclinical or clinical trials also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do. This may prevent us from receiving marketing approvals and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations. If we experience delays in obtaining approval, if we fail to obtain approval of a product candidate or if the label for a product candidate does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate, the commercial prospects for such product candidate may be harmed and our ability to generate revenues from that product candidate will be materially impaired. Accordingly, the successful development of any of our drug candidates is uncertain and, accordingly, we may never commercialize any of these drug candidates or generate significant revenue.
The FDA may determine that our drug candidates have undesirable side effects that could delay or prevent their regulatory approval or commercialization.
Undesirable side effects caused by our drug candidates could cause us, IRBs, and other reviewing entities or regulatory authorities to interrupt, delay, or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. Undesirable side effects may also result in requirements for costly post-marketing testing and surveillance, or other requirements, including REMS, to monitor the safety or efficacy of the products. These could prevent us from commercializing and generating revenues from the sale of our drug candidates.
Many compounds that initially showed promise in clinical or earlier stage testing have later been found to cause side effects that prevented further development of the compound. In addition, adverse events which had initially been considered unrelated to the study treatment may later be found to be caused by the study treatment. Moreover, incorrect or improper use of our drug candidates could cause unexpected side effects or adverse events. If any of our drug candidates is associated with serious adverse events or undesirable side effects or have properties that are unexpected, we may need to abandon development or limit development of that drug candidate to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. The therapeutic-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may significantly harm our business, financial condition, results of operations, and prospects.
If we experience delays or difficulties in the enrolment of patients in clinical trials, our completion of clinical trials and receipt of necessary regulatory approvals could be delayed or prevented.
We may not be able to initiate or continue conducting clinical trials for our drug candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States. Competitors may also have ongoing clinical trials for drug candidates that are intended to treat the same indications as our drug candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ drug candidates. Patient enrollment is affected by other factors including:
Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays and could require us to abandon one or more clinical trials altogether. In particular, there may be low or slow enrollment, and the studies may enroll subjects that do
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not meet the inclusion criteria, requiring the erroneously enrolled subjects to be excluded and the trial population to be increased. Moreover, patients in our clinical trials may be at risk for dropping out of our studies if they are not experiencing relief of their disease. A significant number of withdrawn patients would compromise the quality of our data.
Enrollment delays in our clinical trials may result in increased development costs for our drug candidates, or the inability to complete development of our drug candidates, which would cause the value of our company to decline, limit our ability to obtain additional financing, and materially impair our ability to generate revenues.
Changes in funding for the FDA and other government agencies or future government shutdowns could cause delays in the submission and regulatory review of marketing applications, which could negatively impact our business or prospects.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept submission, applications, and the payment of user fees, and statutory, regulatory, and policy changes. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies, including as a result of the COVID-19 pandemic, may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, had to furlough critical FDA employees and stop critical activities. If a prolonged government shutdown occurs or if agency operations are otherwise impacted, it could significantly affect the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business or prospects.
Failure to obtain regulatory approval in foreign jurisdictions would prevent us from marketing our products internationally.
We intend to have our drug candidates marketed outside the United States. In order to market our products in many non-U.S. jurisdictions, we must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. To date, we have not filed for marketing approval for any of our drug candidates and may not receive the approvals necessary to commercialize our drug candidates in any market.
The approval procedure varies among countries and may include all of the risks associated with obtaining FDA approval. Further, the time required to obtain foreign regulatory approval may differ from that required to obtain FDA approval, and additional pre-clinical studies, clinical trials, other testing and data review may be required. We may not obtain foreign regulatory approvals on a timely basis, if at all. Additionally, approval by the FDA does not ensure approval by regulatory agencies in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory agencies in other foreign countries or by the FDA. However, a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in other jurisdictions, including approval by the FDA. The failure to obtain regulatory approval in foreign jurisdictions could limit commercialization of our products, reduce our ability to generate profits and harm our business.
Any designation granted by the FDA for any of our product candidates may not lead to a faster development or regulatory review or approval process, and does not increase the likelihood that our product candidates will receive marketing approval. We may also not be able to obtain or maintain any such designation.
We currently hold an FDA Fast Track Designation for zandelisib for the treatment of adult patients with relapsed or refractory follicular lymphoma who have received at least two prior systemic therapies. Previously, in August 2016, the FDA granted Breakthrough Therapy Designation to pracinostat for the treatment of AML. However, in July 2020, we announced the discontinuation of the Phase 3 clinical trial of pracinostat, conducted by Helsinn, for the treatment of AML. The FDA also withdrew the pracinostat breakthrough designation. As described in the Government Regulation section of this Amended Annual Report, there are a number of FDA programs that are intended to speed the development of drugs that are intended to treat serious diseases and conditions when there is an unmet need, including Fast Track and Break Through Therapy Designation. Receipt of such designations is within the discretion of the FDA. Accordingly, even if we believe one of our drug candidates meets the criteria for a designation, the FDA may disagree. If we receive any designation, the potential reduced timelines associated with designation may introduce significant chemistry, manufacturing and controls challenges for product development as manufacturing development may need to take place at a faster pace than would otherwise be required because the FDA will expect that properly qualified and manufactured product be available at the time of product approval. In any event, the receipt of a designation for a product candidate may not result in a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even after granting a designation, the FDA may later decide that such product candidates no longer meet the conditions for qualification and rescind such designations.
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Any orphan drug designations we receive may not confer marketing exclusivity or other benefits.
In the United States, under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biological product intended to treat a rare disease or condition. Such diseases and conditions are those that affect fewer than 200,000 individuals in the United States, or if they affect more than 200,000 individuals in the United States, there is no reasonable expectation that the cost of developing and making a drug available in the United States for these types of diseases or conditions will be recovered from sales of the drug. Orphan drug designation must be requested before submitting an NDA. If the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by that agency. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process, but it can lead to financial incentives, such as opportunities for grant funding toward clinical trial costs, tax advantages and user-fee waivers. The EMA and the UK also have programs for orphan drugs.
There is no guarantee that a drug candidate will receive orphan drug designation. There is also no guarantee that we would be able to maintain any designations that we receive. For instance, orphan drug designation in the U.S., EU or UK may be revoked for a number of reasons. If a drug that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the drug is entitled to orphan drug marketing exclusivity for a period of seven years. Orphan drug marketing exclusivity generally prevents the FDA from approving another application, including a full NDA, to market the same drug or biological product for the same indication for seven years, except in limited circumstances, including if the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care. For purposes of small molecule drugs, the FDA defines “same drug” as a drug that contains the same active moiety and is intended for the same use as the drug in question. We may not be able to obtain future orphan drug designations that we may apply for or maintain any orphan drug designations that we may receive. A designated orphan drug also may not receive orphan drug marketing exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation or if it is deemed to be the same drug as a previously approved drug and cannot demonstrate clinical superiority. Similarly, in the EMA (and the MHRA), orphan drugs can receive an exclusivity period of ten years, but can be reduced to six years if the drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified. Orphan designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. By example, we received FDA and EMA orphan drug designation for pracinostat for the treatment of AML. However, in July 2020, we announced the discontinuation of the Phase 3 clinical trial of pracinostat, conducted by Helsinn, for the treatment of AML.
Orphan drug exclusivity may be lost if the FDA, EMA or MHRA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition. Orphan drug exclusivity also may not protect a product from competition. For instance, the FDA may approve a drug that is the same drug with orphan exclusivity for a different indication or a different drug for the same indication as the orphan product. Even after an orphan product is approved, the FDA can also subsequently approve a product containing the same principal molecular features for the same condition if the FDA concludes that the latter product is clinically superior. The FDA may further grant orphan designation to multiple sponsors for the same compound or active molecule and for the same indication. If another sponsor receives FDA approval for such product before we do, we would be prevented from launching our product in the United States for the orphan indication for a period of at least seven years unless we can demonstrate clinical superiority.
Risks Related to the Commercialization of Our Drug Candidates
Even if we or our licensees receive regulatory approval to commercialize our drug candidates, our ability to generate revenues from any resulting products will be subject to a variety of risks, many of which are out of our control.
Even if our drug candidates obtain regulatory approval, resulting products may not gain market acceptance among physicians, patients, healthcare payers or the medical community. We believe that the degree of market acceptance and our ability to generate revenues from such products will depend on a number of factors, including, but not limited to, the following:
If any of our drugs are approved and fail to achieve market acceptance, we may not be able to generate significant revenue to achieve or sustain profitability.
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If any products we develop become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, our ability to successfully commercialize our products will be impaired.
Our future revenues, profitability and access to capital will be affected by the continuing efforts of governmental and private third-party payers to manage, contain or reduce the costs of health care through various means, such as capping prices, limiting price increases, reducing reimbursement, and requiring rebates. We are also unsure of the impact of any future health care reform legislation or other changes in healthcare policy may have on our business or what actions federal, state, foreign and private payers may take or reforms that may be implemented in the future. Therefore, it is difficult to predict the effect of any potential reform on our business. Our ability to commercialize our drug candidates successfully will depend, in part, on the extent to which reimbursement for the cost of such drug candidates and related treatments will be available from government health administration authorities, such as Medicare and Medicaid in the United States, private health insurers and other organizations. Significant uncertainty exists as to the reimbursement status of newly approved health care products, particularly for indications for which there is no current effective treatment or for which medical care typically is not sought. Adequate third-party coverage may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in research and development. If adequate coverage and reimbursement levels are not provided by government and third-party payers for use of our products, our products may fail to achieve market acceptance without a substantial reduction in price or at all and our results of operations will be harmed. In addition, government regulation may restrict our business and financial relationships with health care providers and managed care intermediaries in ways that could impact our ability successfully to market our products.
Further, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which have resulted in several recent Congressional inquiries and proposed and enacted bills by Congress and the states designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. In addition, the United States government, state legislatures, and foreign governments have shown significant interest in implementing cost containment programs, including price-controls, restrictions on reimbursement, requirements for substitution of generic products for branded prescription drugs, and permitting importation of drugs from outside the United States to limit the growth of government paid health care costs. For example, the United States government has passed legislation requiring pharmaceutical manufacturers that participate in federal healthcare programs to provide rebates and discounts to certain entities and governmental payors. Further, Congress and the current administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. Individual states in the United States have also been increasingly passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
Our drug candidates are subject to ongoing government regulation both before and after regulatory approval.
Both before and after regulatory approval, our drug candidates are subject to strict and ongoing regulation. Compliance with such regulations may consume substantial financial and management resources and expose us and our collaborators to the potential for other adverse circumstances. For example, a regulatory authority can place restrictions on the sale or marketing of a drug in order to manage the risks identified during initial clinical trials or after the drug is on the market. A regulatory authority can condition the approval for a drug on costly post-marketing follow-up studies. Based on these studies, if a regulatory authority does not believe that the drug demonstrates a clinical benefit to patients or an acceptable safety profile, it could limit the indications for which a drug may be sold or revoke the drug’s marketing approval. In addition, identification of certain side effects either during clinical trials or after a drug is on the market may result in reformulation of a drug, additional pre-clinical and clinical trials, labeling changes, termination of ongoing clinical trials or withdrawal of approval. Any of these events could delay or prevent us from generating revenue from the commercialization of these drugs and cause us to incur significant additional costs.
Compliance with the applicable regulatory requirements may result in significant expenses and we and our third-party contractors and collaborators may be subject to unannounced FDA and other regulatory authority inspections. Any failure to comply with the applicable regulatory requirements or problems with our drug candidates may result in regulatory enforcement or other actions, including:
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Non-compliance with any foreign jurisdictions’ requirements, including requirements regarding the protection of personal information, can also lead to significant penalties and sanctions.
Any of these events could prevent us from achieving or maintaining regulatory product approval and market acceptance of the particular drug candidate, if approved, or could substantially increase the costs and expenses of developing and commercializing such product, which in turn could delay or prevent us from generating significant revenues from its sale.
Other changes may also impact our ability to conduct studies and the approvability or marketability of our drug candidates, including changes in law, government regulation, or FDA policy, including review policies, which may be due to changes in the U.S. government and U.S. administration, or changes in medical practice or standard of care.
If we are slow or unable to adapt to changes in existing requirements, standards of care, or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and be subject to regulatory enforcement action. Should any of the above actions take place, they could adversely affect our ability to achieve or sustain profitability.
We may not be able to establish the contractual arrangements necessary to develop, market and distribute our drug candidates.
A key part of our strategy is to establish contractual relationships with third parties to package, market and distribute our drug candidates. There is no assurance that we will be able to negotiate commercially acceptable licensing or other agreements for the future exploitation of our drug candidates, including continued clinical development, manufacture or marketing. If we are unable to successfully contract for these services, or if arrangements for these services are terminated, we may have to delay our commercialization program which will adversely affect our ability to generate operating revenues.
Our commercial opportunity will be reduced or eliminated if competitors develop and market products that are more effective, have fewer side effects or are less expensive than our drug candidates.
The development of drug candidates is highly competitive. A number of other companies have products or drug candidates that have either been approved or are in various stages of pre-clinical or clinical development that are intended for the same therapeutic indications for which our drug candidates are being developed. Some of these potential competing drug candidates are further advanced in development than our drug candidates and may be commercialized sooner. Even if we are successful in developing effective drugs, our compounds may not compete successfully with products produced by our competitors.
Our competitors include pharmaceutical companies and biotechnology companies, as well as universities and public and private research institutions. In addition, companies active in different but related fields represent substantial competition for us. Many of our competitors developing oncology drugs have significantly greater capital resources, larger research and development staffs and facilities and greater experience in drug development, regulation, manufacturing and marketing than we do. These organizations also compete with us and our service providers, to recruit qualified personnel, and with us to attract partners for joint ventures and to license technologies that are competitive with us. As a result, our competitors may be able to more easily develop technologies and products that would render our technologies or our drug candidates obsolete or non-competitive.
Our product candidates may face competition sooner than anticipated.
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Our product candidates, if approved, may face competition from other products that are the same as or similar to our product candidates. If the FDA or comparable foreign regulatory authorities approve generic or similar versions of any of our product candidates that receive marketing approval, or such authorities do not grant our products appropriate periods of regulatory exclusivity before approving generic or similar versions of our products, the sales of our products could be adversely affected.
Once an NDA is approved, the product will become a “reference listed drug” in the FDA’s Orange Book. Other applicants may then seek approval of generic versions of our products through submission of Abbreviated New Drug Applications ("ANDA") in the United States. Generic products may be significantly less costly to bring to market than the reference listed drug and companies that produce generic products are generally able to offer them at lower prices, and are generally preferred by third party payors. As a result, the FDA, the administration and Congress have recently taken steps to encourage increased generic drug competition in the market in an effort to bring down drug costs. Following the introduction of a generic drug, a significant percentage of the sales of any branded product or reference listed drug is typically lost to the generic product. Moreover, in addition to generic competition, we could face competition from other companies seeking approval of drug products that are similar to ours using the 505(b)(2) regulatory pathway. Such applicants may be able to rely on our product candidates, if approved, or other approved drug products or published literature to develop drug products that are similar to ours. The introduction of a drug product similar to our product candidates could expose us to increased competition.
Any ANDA or 505(b)(2) applicants seeking to rely upon any of our product candidates, if such product candidates are approved, would need to submit patent certification statements with their applications for any of our patents that are listed in the FDA’s Orange Book. There are detailed rules and requirements regarding the patents that may be submitted to the FDA for listing in the Orange Book. We may be unable to obtain patents covering our product candidates that contain one or more claims that satisfy the requirements for listing in the Orange Book. If one of our product candidates is approved and a patent covering that product candidate is not listed in the Orange Book, an ANDA or 505(b)(2) applicant would not have to submit a patent certification with regard to such patent to the FDA, in which case, we would not receive the protections provided by the Hatch Waxman Act.
Moreover, if an ANDA or 505(b)(2) applicant files a paragraph IV challenge to any patents that we may list in the FDA’s Orange Book and if we do not file a timely patent infringement lawsuit, the ANDA or 505(b)(2) applicant would not be subject to a 30-month stay. If we did file such an action, the litigation or other proceedings to enforce or defend our intellectual property rights would likely be complex in nature, may be expensive and time consuming, may divert our management’s attention from our core business, and may result in unfavorable results that could adversely impact our ability to prevent third parties from competing with our products. Accordingly, upon approval of our product candidates we may be subject to generic competition or competition from similar products, or may need to commence patent infringement proceedings, which would divert our resources.
We currently anticipate that we may be eligible for five years of non-patent marketing exclusivity in the United States. This exclusivity, however, would not prevent other companies from submitting full NDAs. To the extent we do not receive any anticipated periods of regulatory exclusivity or to the extent the FDA or foreign regulatory authorities approve any generic, similar, or other competing products, our business would be adversely impacted. Competition that our products may face from generic, similar, or other competing products could materially and adversely impact our future revenue, profitability, and cash flows and substantially limit our ability to obtain a return on the investments we have made in those product candidates.
Risks Related to Our Reliance on Third Parties
We rely on third parties to conduct our clinical trials and pre-clinical studies. If those parties do not successfully carry out their contractual duties or meet expected deadlines, our drug candidates may not advance in a timely manner or at all.
In the course of our pre-clinical testing and clinical trials, we rely on third parties, including laboratories, investigators, clinical contract research organizations (“CROs”), manufacturers, and distributors to perform critical services for us. For example, we rely on third parties to conduct our clinical trials and many of our pre-clinical studies, which are required to be conducted consistent with regulations on GLPs and GCPs. CROs and study sites are responsible for many aspects of the trials, including finding and enrolling subjects for testing and administering the trials. Although we rely on these third parties to conduct our pre-clinical and clinical trials, we are responsible for ensuring that each of our trials is conducted in accordance with its investigational plan and protocol and that the integrity of the studies and resulting data is protected. While we have agreements governing the activities of such third parties, we have limited influence and control over their actual performance and activities. Moreover, the FDA and foreign regulatory authorities require us to comply with regulations and standards, commonly referred to as GCPs, for conducting, monitoring, recording, and reporting the results of clinical trials to ensure that the data and results are scientifically credible and accurate, and that the trial subjects are adequately informed of the potential risks of participating in clinical trials. Our reliance on third parties does not relieve us of these responsibilities and requirements. These third parties may not be available when we need them or, if they are available, may not devote sufficient time or resources to our studies, may not comply with all regulatory and contractual requirements, or may not otherwise perform their services in a timely or acceptable manner, and we may need to enter into new arrangements with alternative third parties and our clinical trials may be extended, delayed or terminated. These independent third parties may also have relationships with other commercial entities, some of which may compete with us. In addition, if such third parties fail to perform their obligations in compliance with our protocols or the applicable regulatory requirements, our trials may not meet regulatory
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requirements or may need to be repeated, we may not receive marketing approvals, or we or such third parties may face regulatory enforcement.
Agreements with third parties conducting or otherwise assisting with our clinical or preclinical studies might terminate for a variety of reasons, including a failure to perform by the third parties. If any of our relationships with these third parties terminate, we may not be able to enter into arrangements with alternative providers or to do so on commercially reasonable terms. Switching or adding additional third parties involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new third party commences work. As a result, if we need to enter into alternative arrangements, it could delay our product development activities and adversely affect our business. Though we carefully manage our relationships with our third parties, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects, and results of operations.
Accordingly, as a result of our dependence on third parties, we may face delays, failures or cost increases outside of our direct control. These risks also apply to the development activities of collaborators, and we do not control their research and development, clinical trial or regulatory activities.
In addition, we will be required to report certain financial interests of our third-party investigators if these relationships exceed certain financial thresholds or meet other criteria. The FDA or comparable foreign regulatory authorities may question the integrity of the data from those clinical trials conducted by investigators who may have conflicts of interest.
We also cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our trials complies with the applicable regulatory requirements. In addition, our clinical trials must be conducted with drug candidates that were produced under cGMP conditions. Failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process. We also are required to register certain clinical trials and post the results of certain completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within specified timeframes. Failure to do so can result in enforcement actions and adverse publicity.
We will depend on third party suppliers and contract manufacturers for the manufacturing of our drug candidates and have no direct control over the cost of manufacturing our drug candidates. Increases in the cost of manufacturing our drug candidates would increase our costs of conducting clinical trials and could adversely affect our future profitability.
We do not intend to manufacture our drug candidates ourselves, and we will rely on third parties for our drug supplies both for clinical trials and for commercial quantities in the future. We have taken the strategic decision not to manufacture active pharmaceutical ingredients (“API”), nor finished product, for our drug candidates, as these can be more economically supplied by third parties with particular expertise in this area. We have identified contract facilities that are registered with the FDA, have a track record of large- scale API and drug product manufacturing, and have already invested in capital and equipment. We have no direct control over the manufacturing of our drug candidates, or the cost thereof. If the contract manufacturers are unable to produce sufficient quantities of our drug candidates, as a result of a lack of available materials or otherwise, our ability to complete product candidate development and our future profitability would be adversely affected. If the cost of manufacturing increases, or if the cost of the materials used increases, these costs will be passed on to us, making the cost of conducting clinical trials more expensive. Increases in manufacturing costs could adversely affect our future profitability if we are unable to pass all of the increased costs along to our customers.
If these third-party manufacturers do not successfully carry out their contractual duties, meet expected deadlines or manufacture our drug candidates in accordance with regulatory requirements, if there are disagreements between us and such parties, or if such parties are unable to expand capacities to support commercialization of any of our drug candidates for which we obtain marketing approval, we may not be able to produce, or may be delayed in producing sufficient drug candidates to meet our supply requirements. Any delays in obtaining adequate supplies with respect to our drug candidates and components may delay the development or commercialization of our drug candidates.
Further, we, along with our contract manufacturers, are required to comply with FDA requirements for cGMPs, related to product testing, quality assurance, manufacturing and documentation. Our contract manufacturers may not be able to comply with the applicable FDA regulatory requirements, which could result in delays to our product development programs, could result in adverse regulatory actions against them or us, and could prevent us from ultimately receiving product marketing approval. They also generally must pass an FDA preapproval inspection for conformity with cGMPs before we can obtain approval to manufacture our drug candidates and will be subject to ongoing, periodic, unannounced inspection by the FDA and corresponding state agencies to ensure strict compliance with cGMP, and other applicable government regulations and corresponding foreign standards. If we and our contract manufacturers fail to achieve and maintain high manufacturing standards in compliance with cGMP, we may experience manufacturing errors resulting in defective products that could be harmful to patients, product recalls or withdrawals, delays or interruptions of production or failures in product testing or delivery, clinical trial or other development program delays, delay or prevention of filing or approval of marketing applications for our products, cost overruns or other problems that could seriously harm our business. Not complying with FDA requirements could result in a product recall, costly and
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time-consuming corrective or preventative actions, or prevent commercialization of our drug candidates and delay our business development activities. In addition, such failure could be the basis for the FDA to issue a warning or untitled letter or take other regulatory or legal enforcement action, including recall or seizure, total or partial suspension of production, suspension of ongoing clinical trials, refusal to approve pending applications or supplemental applications, and potentially civil and/or criminal penalties depending on the matter.
If we need to replace any of our manufacturers or establish additional manufacturing arrangements, we may not succeed in our efforts. Our drug candidates may compete with other products and drug candidates for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that are both capable of manufacturing for us and willing to do so. If our existing third-party manufacturers, or the third parties that we engage in the future to manufacture a product or component for commercial sale or for our clinical trials should cease to continue to do so for any reason, we likely would experience delays in obtaining sufficient quantities of our drug candidates for us to meet commercial demand or to advance our clinical trials while we identify and qualify replacement suppliers. These third-party facilities may also be affected by natural disasters, such as floods or fire, or such facilities could face manufacturing issues, such as contamination or regulatory findings following a regulatory inspection of such facility. In such instances, we may need to locate an appropriate replacement third-party relationship, which may not be readily available or on acceptable terms, which would cause additional delay and increased expense. The addition of a new or alternative manufacturer may also require FDA approvals and may have a material adverse effect on our business.
We or our third-party manufacturers may also encounter shortages in the raw materials, therapeutic substances, or active pharmaceutical ingredients necessary to produce our drug candidates in the quantities needed for our clinical trials or, if our drug candidates are approved, in sufficient quantities for commercialization or to meet an increase in demand. Such shortages may occur for a variety of reasons, including capacity constraints, delays or disruptions in the market, and shortages caused by the purchase of such materials by our competitors or others. Our or our third-party manufacturers’ failure to obtain the raw materials, therapeutic substances, or active pharmaceutical ingredients necessary to manufacture sufficient quantities of our drug candidates may have a material adverse effect on our business. If for any reason we are unable to obtain adequate supplies of our drug candidates or the components used to manufacture them, it will be more difficult for us to develop our drug candidates and compete effectively.
We rely on acquisitions or licenses from third parties to expand our pipeline of drug candidates.
We are not presently engaged in drug discovery activities. In order to expand our pipeline of drug candidates for future development, we may need to purchase or in-license any such drug candidates. The success of this strategy depends in large part on the combination of our regulatory and development capabilities and expertise and our ability to identify, select and acquire or in-license clinically-enabled product candidates on terms that are acceptable to us. Identifying, selecting and acquiring or in-licensing promising product candidates requires substantial technical expertise, and we have limited experience in identifying and integrating any acquired product candidates into our current infrastructure. Efforts to do so may not result in the actual acquisition or in-license of a particular drug candidate, potentially resulting in a diversion of our management’s time and the expenditure of our resources with no resulting benefit. If we are unable to identify, select and acquire or license suitable product candidates from third parties on terms acceptable to us, our business and prospects may be limited.
Risks Related to Our Intellectual Property
Our commercial success is dependent, in part, on obtaining and maintaining patent protection and preserving trade secrets, which cannot be guaranteed.
Patent protection and trade secret protection are important to our business and our future will depend, in part on our ability to maintain trade secret protection, obtain patents and operate without infringing the proprietary rights of others both in the United States and abroad. Litigation or other legal proceedings may be necessary to defend against claims of infringement, to enforce our patents or to protect our trade secrets. Such litigation could result in substantial costs and diversion of our management’s attention.
The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions. In September 2013, we acquired patents and patent applications related to zandelisib from Pathway Therapeutics, Inc. In September 2017, we acquired patents and patent applications related to voruciclib from Presage. In 2011, we acquired both issued patents and pending patent applications related to ME-344 from Novogen in relation to our Isoflavone-based compounds, which we previously licensed from Novogen. Additionally, Novogen had previously applied for patents in a number of countries with respect to the use of their isoflavone compounds, including ME-344. The patent applications may not proceed to grant or may be amended to reduce the scope of protection of any patent granted. The applications and patents may also be opposed or challenged by third parties. Our commercial success will depend, in part, on our ability to obtain and maintain effective patent protection for our compounds and their use in treating, preventing, or curing cancer, and to successfully defend patent rights in those technologies against third-party challenges. As patent applications in the United States are maintained in secrecy until published or issued and as publication of discoveries in the scientific or patent literature often lag behind the actual discoveries, we cannot be certain that we or Presage were the first to make the inventions covered by the pending patent applications or issued patents referred to above or that we or they were the first to file patent applications for such inventions. Additionally, the breadth of claims
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allowed in biotechnology and pharmaceutical patents or their enforceability cannot be predicted. We cannot be sure that, should any patents issue, we will be provided with adequate protection against potentially competitive products. Furthermore, we cannot be sure that should patents issue, they will be of commercial value to us, or that private parties, including competitors, will not successfully challenge our patents or circumvent our patent position in the United States or abroad.
Claims by other companies that we infringe on their proprietary technology may result in liability for damages or stop our development and commercialization efforts.
The pharmaceutical industry is highly competitive, and patents have been applied for by, and issued to, other parties relating to products competitive with the compounds that we have acquired. Therefore, zandelisib, voruciclib, ME-344 and pracinostat, and any other drug candidates, may give rise to claims that they infringe the patents or proprietary rights of other parties existing now and in the future.
Furthermore, to the extent that we or our consultants or research collaborators use intellectual property owned by others in work performed for us, disputes may also arise as to the rights in such intellectual property or in resulting know-how and inventions. An adverse claim could subject us to significant liabilities to such other parties and/or require disputed rights to be licensed from such other parties.
We have contracted formulation development and manufacturing process development work for our product candidates. This process has identified a number of excipients, or additives to improve drug delivery, which may be used in the formulations. Excipients, among other things, perform the function of a carrier of the active drug ingredient. Some of these identified excipients or carriers may be included in third party patents in some countries. We intend to seek a license if we decide to use a patented excipient in the marketed product or we may choose one of those excipients that does not have a license requirement.
We cannot be sure that any license required under any such patents or proprietary rights would be made available on terms acceptable to us, if at all. If we do not obtain such licenses, we may encounter delays in product market introductions, or may find that the development, manufacture or sale of products requiring such licenses may be precluded.
We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.
Many of our employees and the employees of KKC and third parties upon which we rely to conduct our clinical trials were previously employed at universities or at other biotechnology or pharmaceutical companies, some of which may be competitors or potential competitors. Some of these employees executed proprietary rights, non-disclosure and non-competition agreements, or similar agreements, in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such third party. Litigation may be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.
In addition, while we typically require our employees, consultants, advisors and collaborators who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, which may result in claims by or against us related to the ownership of such intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our senior management and scientific personnel.
We may be subject to substantial costs stemming from our defense against third-party intellectual property infringement claims.
Third parties may assert that we are using their proprietary information without authorization. Third parties may also have or obtain patents and may claim that technologies licensed to or used by us infringe their patents. If we are required to defend patent infringement actions brought by third parties, or if we sue to protect our own patent rights, we may be required to pay substantial litigation costs and managerial attention may be diverted from business operations even if the outcome is not adverse to us. In addition, any legal action that seeks damages or an injunction to stop us from carrying on our commercial activities relating to the affected technologies could subject us to monetary liability and require us or any third party licensors to obtain a license to continue to use the affected technologies. We cannot predict whether we would prevail in any of these types of actions or that any required license would be made available on commercially acceptable terms or at all.
General Business Risks
We face a risk of product liability claims and claims may exceed our insurance limits.
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Our business exposes us to the risk of product liability claims. This risk is inherent in the manufacturing, testing and marketing of human therapeutic products. Moreover, regardless of merit or eventual outcome, liability claims can have other adverse consequences, including:
Our product liability insurance coverage is subject to deductibles and coverage limitations. We may not be able to obtain or maintain adequate protection against potential liabilities, or claims may exceed our insurance limits. If we cannot or do not sufficiently insure against potential product liability claims, we may be exposed to significant liabilities, which may materially and adversely affect our business development and commercialization efforts.
Our employees, independent contractors, consultants, commercial partners, principal investigators, or CROs may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees, independent contractors, consultants, commercial partners, manufacturers, investigators, or CROs could include intentional, reckless, negligent, or unintentional failures to comply with FDA regulations, comply with applicable fraud and abuse laws, provide accurate information to the FDA, properly calculate pricing information required by federal programs, comply with federal procurement rules or contract terms, report financial information or data accurately or disclose unauthorized activities to us. This misconduct could also involve the improper use or misrepresentation of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter this type of misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. Moreover, it is possible for a whistleblower to pursue a False Claims Act, (“FCA”), case against us even if the government considers the claim unmeritorious and declines to intervene, which could require us to incur costs defending against such a claim. Further, due to the risk that a judgment in an FCA case could result in exclusion from federal health programs or debarment from government contracts, whistleblower cases often result in large settlements. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, financial condition, and results of operations, including the imposition of significant fines or other sanctions.
Our business and operations would suffer in the event of system failures.
Our internal computer systems and those of our CROs and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war, and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug candidate development and, if such drug candidates are approved commercialization programs. For example, the loss of clinical trial data from completed, ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of personal, confidential or proprietary information, we could incur liability and regulatory enforcement actions, and the further development of any of our drug candidates could be delayed.
Our efforts will be seriously jeopardized if we are unable to retain and attract key employees.
Our success depends on the continued contributions of our principal management, development and scientific personnel. We face competition for such personnel, and we believe that risks and uncertainties related to our business, including the timing and risk associated with research and development, our available and anticipated cash resources, and the volatility of our stock price, may impact our ability to hire and retain key and other personnel. The loss of services of our Chief Executive Officer or other key employees could adversely impact our operations and ability to generate or raise additional capital.
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Negative U.S. and global economic conditions may pose challenges to our business strategy, which relies on funding from the financial markets or collaborators.
Negative conditions in the U.S. or global economy, including financial markets, may adversely affect our business and the business of current and prospective vendors, licensees and collaborators, and others with whom we do or may conduct business. The duration and severity of these conditions is uncertain. If negative economic conditions occur, we may be unable to secure funding on terms satisfactory to us to sustain our operations or to find suitable collaborators to advance our internal programs, even if we achieve positive results from our drug development programs.
Laws, rules and regulations relating to public companies may be costly and impact our ability to attract and retain directors and executive officers.
Laws and regulations affecting public companies, including rules adopted by the Securities and Exchange Commission (“SEC”) and by the National Association of Securities Dealers Automated Quotations (“Nasdaq”), may result in increased costs to us. These laws, rules and regulations could make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on our board committees or as executive officers. We cannot estimate accurately the amount or timing of additional costs we may incur to respond to these laws, rules and regulations.
We have identified a material weakness in our internal control over financial reporting and determined that our disclosure controls and procedures were ineffective as of June 30, 2021, as a result of the restatement of our financial statements as of and for the years ended June 30, 2021 and 2020. Relevant unaudited interim financial information for each of the quarterly periods ended September 30, 2020 through December 31, 2021 will also be restated. In the future, we may identify additional material weaknesses or otherwise fail to maintain an effective system of internal control over financial reporting or adequate disclosure controls and procedures, which may result in material errors in our financial statements or cause us to fail to meet our period reporting obligations.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as of June 30, 2021. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In Management's Report on Internal Control over Financial Reporting included in our Original Form 10-K for the year ended June 30, 2021, our management previously concluded that we maintained effective internal control over financial reporting as of June 30, 2021. Our management subsequently concluded that a material weakness existed and our internal control over financial reporting was not effective as of June 30, 2021.
In May 2022, we determined that we made certain errors in the manner in which we recognized revenue from our License, Development and Commercialization Agreement with Kyowa Kirin Company (the “KKC Commercialization Agreement”) with the result that revenue was overstated in some quarters and understated in other quarters in our financial statements during 2020 and 2021. The errors relate to the appropriate timing and amounts of revenue recognized over time under the cost-to-cost method associated with the KKC Commercialization Agreement.
As a result, we determined that there were material errors in the financial statements that required a restatement of the June 30, 2021 and 2020 financial statements included in the Original Form 10-K for the year ended June 30, 2021 and our Forms 10-Q for the quarterly periods ended September 30, 2020 through December 31, 2021. This was due to the inadequate design and implementation of controls to evaluate and monitor the accounting for revenue recognition related to license agreements.
Management is actively engaged in the planning for, and implementation of, remediation efforts to address our material weakness. The remediation plan includes enhancement of our existing contract review control for license agreements to confirm appropriate understanding of the terms as well as implementation of a new control designed to evaluate and monitor, at inception and on a quarterly basis, the estimated consideration to be received under license agreements for purposes of revenue recognition, and enhanced detailed review of our revenue recognition models.
If we are not able to comply with the requirements of the Sarbanes-Oxley Act or if we are unable to maintain effective internal control over financial reporting, we may not be able to produce timely and accurate financial statements or guarantee that information required to be disclosed by us in the reports that we file with the SEC, is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms. Any failure of our internal control over financial reporting or disclosure controls and procedures could cause our investors to lose confidence in our publicly reported information, cause the market price of our stock to decline, expose us to sanctions or investigations by the SEC or other regulatory authorities, or impact our results of operations.
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
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In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our suppliers, as well as personally identifiable information of clinical trial participants and employees. Similarly, our third-party providers possess certain of our sensitive protected health data. The secure maintenance of this information is critical to our operations and business strategy. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Attacks of this nature are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise. Although we develop and maintain systems and controls designed to prevent these events from occurring, and we have a process to identify and mitigate threats, the development and maintenance of these systems, controls and processes is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated, and such systems, controls and processes may not be successful in preventing a breach. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. We could be required to expend significant amounts of money and other resources to repair or replace information systems or networks. In addition, our liability insurance may not be sufficient in type or amount to cover us against claims related to security breaches, cyberattacks and other related breaches.
The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing amount of focus on privacy and data protection issues with the potential to affect our business, including compliance with the Health Insurance Portability and Accountability Act of 1996 and state laws requiring security breach notification. The collection and use of personal health data of individuals in the European Union is also governed by strict data protection laws. In addition to existing laws, since May 25, 2018, the General Data Protection Regulation (“GDPR”) has imposed obligations with respect to European Union data and substantial fines for breaches of the data protection rules. It will increase our responsibility and potential liability in relation to personal data that we process, and we will be required to put in place additional mechanisms ensuring compliance with the new European Union data protection rules. There is significant uncertainty related to the manner in which data protection authorities will seek to enforce compliance with GDPR. For example, it is not clear if the authorities will conduct random audits of companies doing business in the European Union, or if the authorities will wait for complaints to be filed by individuals who claim their rights have been violated. Enforcement uncertainty and the costs associated with ensuring GDPR compliance may be onerous and adversely affect our business, operating results, prospects and financial condition.
We are in the process of assessing the “Schrems II” decision issued by the Court of Justice of the European Union on July 16, 2020, and its impact on our data transfer mechanisms. The Court invalidated the EU-U.S. Privacy Shield Framework as a legal basis for the transfer of personal data from the European Economic Area (“EEA”) member states or the U.K. to the U.S. The Court also expressed uncertainty under which conditions data importers and exporters could use the EC’s Standard Contractual Clauses option under the GDPR as a method for transferring personal data outside of the EEA. On June 4, 2021 the European Commission issued new standard contractual clauses for data transfers out of the EU to the third countries with “inadequate data protection” such as the United States. However, there is an implementation period of 18 months for these new standard contractual clauses. It remains uncertain, how these standard contractual clauses will be implemented by the data exporters and data importers. MEI observes the developments and will agree to the appropriate data transfer mechanism. In particular, we may rely on individual contents of the patients where appropriate and necessary to safeguard the data flow from the EU to the United States. Present solutions to legitimize transfers of personal data from the EEA may be challenged or deemed insufficient. We may, in addition to other impacts, experience additional costs associated with increased compliance burdens, and we and our customers face the potential for regulators in the EEA or U.K. to apply different standards to the transfer of personal data from the EEA/ U.K. to the U.S., and to block, or require ad hoc verification of measures taken with respect to, certain data flows from the EEA or U.K. to the U.S. We also may be required to engage in new contract negotiations with third parties that aid in processing data on our behalf. We may experience reluctance or refusal by current or prospective European clinical trial sites and CROs to use our products, and we may find it necessary or desirable to make further changes to our processing of personal data of EEA or U.K. data subjects.
Additionally, California has enacted legislation that has been dubbed the first “GDPR-like” law in the United States. Known as the California Consumer Privacy Act (“CCPA”), it creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. The CCPA requires covered companies to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of personal information, and allow for a new cause of action for data breaches. The CCPA may significantly impact our business activities and require substantial compliance costs that adversely affect business, operating results, prospects and financial condition. Amendments to the CCPA mandated by the California Privacy Rights Act (“CPRA”) will impose additional privacy requirements, effective on January 1, 2023. Similarly comprehensive state consumer privacy laws in Virginia and Colorado will also become effective in 2023. These new state privacy measures may reflect the start of a movement in other state legislatures to enact more comprehensive, “GDPR-like” privacy laws, which would create a more complex privacy regulatory landscape for our business in the United States.
Thus, any access, disclosure or other loss of information, including our data being breached at our partners or third-party providers, could result in legal claims or proceedings and liability under laws that protect the privacy of personal information, disrupt our operations and damage our reputation, which could adversely affect our business.
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If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. From time to time and in the future, our operations may involve the use of hazardous and flammable materials, including chemicals and biological materials, and may also produce hazardous waste. Even if we contract with third parties for the disposal of these materials and waste, we cannot completely eliminate the risk of contamination or injury resulting from these materials. In the event of contamination or injury resulting from the use or disposal of our hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.
We maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, but this insurance may not provide adequate coverage against potential liabilities. However, we do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. Current or future environmental laws and regulations may impair our research, development or production efforts. In addition, failure to comply with these laws and regulations may result in substantial fines, penalties or other sanctions.
We or the third parties upon whom we depend may be adversely affected by natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Events outside of our control, including natural disasters and public health emergencies, could severely disrupt our operations and have a material adverse effect on our business, operating results, prospects or financial condition. If a natural disaster, or public health emergency such as COVID-19, power outage or other event occurred that prevented us from conducting our clinical trials, including by damaging our critical infrastructure, such as third-party facilities, or that otherwise disrupted operations and travel, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse effect on our business, operating results, prospects or financial condition.
Limitations on the deductibility of net operating losses could adversely affect our business and financial condition.
We have a history of net operating losses. In December 2017, the U.S government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act limits the deduction of net operating losses to 80% of current year taxable income, however, as a result of the CARES Act, the 80% limitation was temporarily repealed until our fiscal year ending June 30, 2021. The limitations on the net operating loss deduction, as well other changes in tax policy, may subject us to additional taxation, adversely affecting our results of operations and financial condition.
Risks Related to Securities Markets and Investment in our Stock
The trading price of the shares of our common stock has been and may continue to be highly volatile and could decline in value and we may incur significant costs from class action litigation.
The trading price of our common stock could be highly volatile in response to various factors, many of which are beyond our control, including, but not limited to, the following:
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Equity markets in general, and the market for biotechnology and life sciences companies in particular, have experienced substantial price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies traded in those markets. In addition, changes in economic conditions in the U.S., the Europe or globally, particularly in the context of current global events, could impact upon our ability to grow profitably. Adverse economic changes are outside our control and may result in material adverse impacts on our business or our results of operations. These broad market and industry factors may materially affect the market price of shares of our common stock, regardless of our development and operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted against that company. Such litigation, if instituted against us, could cause us to incur substantial costs and divert management’s attention and resources.
Future sales of our common stock, including common stock issued upon exercise of outstanding warrants or options, may depress the market price of our common stock and cause stockholders to experience dilution.
The market price of our common stock could decline as a result of sales of substantial amounts of our common stock in the public market, including upon exercise of outstanding warrants or stock options, and any subsequent sales of such shares. As of June 30, 2021, we had outstanding warrants exercisable to purchase 16,058,985 shares of common stock at an exercise price of $2.54 per share, which expire in May 2023. We also had outstanding options to purchase 16,668,542 shares of common stock and outstanding restricted stock units ("RSUs") representing the right to receive 400,650 shares of common stock. We may seek additional capital through one or more additional equity transactions in the future; however, such transactions will be subject to market conditions and there can be no assurance any such transactions will be completed. If we sell shares in the future, the prices at which we sell these future shares will vary, and these variations may be significant. Stockholders will experience significant dilution if we sell these future shares at prices significantly below the price at which such previous stockholders invested.
Because we do not intend to pay, and have not paid, any cash dividends on our shares of common stock, our stockholders will not be able to receive a return on their shares unless the value of our common stock appreciates and they sell their shares.
We have never paid or declared any cash dividends on our common stock, and we intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Therefore, our stockholders will not be able to receive a return on their investment unless the value of our common stock appreciates and they sell their shares.
We will have broad discretion over the use of the net proceeds from any exercise of outstanding warrants and options.
We will have broad discretion to use the net proceeds to us upon any exercise of outstanding warrants and options, and investors in our stock will be relying on the judgment of our board of directors and management regarding the application of these proceeds. Although we expect to use a substantial portion of the net proceeds from any exercise of the warrants and options for general corporate purposes and progression of our clinical trial programs, we have not allocated these net proceeds for specific purposes.
We are authorized to issue blank check preferred stock, which could adversely affect the holders of our common stock.
Our amended and restated certificate of incorporation allows us to issue blank check preferred stock with rights potentially senior to those of our common stock without any further vote or action by the holders of our common stock. The issuance of a class of preferred stock could decrease the amount of earnings and assets available for distribution to the holders of our common stock or could adversely affect the rights and powers, including voting rights, of such holders. In certain circumstances, such issuance could have the effect of decreasing the market price of our shares, or making a change in control of the Company more difficult.
Anti-takeover provisions contained in our amended and restated certificate of incorporation and third amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
Our amended and restated certificate of incorporation and third amended and restated bylaws contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions include:
45
Our third amended and restated bylaws require, to the fullest extent permitted by law, that derivative actions brought in our name, actions against our directors, officers, other employees or stockholders for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel, which may have the effect of discouraging lawsuits against our directors, officers, other employees or stockholders.
Our third amended and restated bylaws provide that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will, to the fullest extent permitted by law, be the sole and exclusive forum for any stockholder to bring (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim against the Company, its directors, officers or employees arising pursuant to any provision of the Delaware General Corporation Law, or (iv) any action asserting a claim against the Company, its directors, officers or employees governed by the internal affairs doctrine, and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel, provided, however, that, in each case, if the Court of Chancery does not have jurisdiction, the forum for such action shall be another state court located within the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware, in all cases subject to the court having personal jurisdiction over the indispensable parties named as defendants therein.
Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Company shall be deemed to have notice of and consented to such provisions.
Notwithstanding the foregoing, the forum selection provision of our third amended and restated bylaws will not apply to suits brought to enforce any liability or duty created by the federal securities laws or any other claim for which the federal district courts of the United States of America shall be the sole and exclusive forum.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in our third amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
Our executive officers and directors may sell shares of their stock, and these sales could adversely affect our stock price.
Sales of our stock by our executive officers and directors, or the perception that such sales may occur, could cause the market price of our common stock to decline or could make it more difficult for us to raise funds through the sale of equity in the future, either as part, or outside, of trading plans under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We have leased approximately 32,800 square feet of office space in San Diego, California. The contractual lease term began in July 2020 and will expire in March 2028. The average annual lease payments over the term of the lease will approximate $1.6 million, plus a pro rata share of certain building expenses. Our total contractual obligation over the term of the lease is approximately $10.7 million.
Item 3. Legal Proceedings
On August 10, 2020, Guy Bahat, an individual who allegedly purchased 50 shares of our common stock filed a putative securities class action lawsuit (the “Securities Class Action”) in the United States District Court for the Southern District of California against the Company, Dr. Daniel P. Gold, and Mr. Brian G. Drazba, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the
46
“Exchange Act”) and Rule 10b-5 thereunder. Mr. Bahat did not seek appointment as lead plaintiff, and the court appointed another individual, Ramesh Mahalingham, as lead plaintiff. The plaintiff seeks to sue on behalf of all purchasers of our securities from August 2, 2017 through July 1, 2020 and alleges, among other things, that we made false and misleading statements relating to pracinostat during the proposed class period. On February 16, 2021, the lead plaintiff filed a notice of voluntary dismissal without prejudice, thereby concluding the class action litigation.
On October 21, 2020, Peter D’Arcy, an individual who alleges that he is a Company stockholder, filed a putative stockholder derivative action nominally on behalf of the Company in the United States District Court for the District of Delaware (the “Derivative Action”) against Dr. Gold, Mr. Drazba, Mr. Charles V. Baltic, III, Dr. Kevan E. Clemens, Mr. Frederick W. Driscoll, Dr. Nicholas R. Glover, Ms. Tamar D. Howson, Dr. Thomas C. Reynolds, Mr. William D. Rueckert, and Dr. Christine A. White, and naming the Company as a nominal defendant. Additional putative stockholder derivative suits were filed in the same court naming the same defendants plus Dr. Robert D. Mass on December 2, 2020 and December 15, 2020 by Gerald Wright and William Trablicy, respectively, who also allege that they are Company stockholders, and these additional suits were consolidated into the Derivative Action by court order. The Derivative Action is based upon the pracinostat-related allegations in the Securities Class Action described above, and alleges claims under Section 14(a) of the Exchange Act and claims for breach of fiduciary duty, unjust enrichment, corporate waste, and contribution. On February 24, 2021, following the resolution of the class action litigation, the parties stipulated request for voluntary dismissal without prejudice, which the court granted on February 25, 2021.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is listed on the Nasdaq Capital Market under the symbol “MEIP”.
Holders
As of August 31, 2021, there were 112,678,498 shares of our common stock outstanding and 568 holders of record of our common stock. This number was derived from our stockholder records and does not include beneficial owners of our common stock whose shares are held in the name of various dealers, clearing agencies, banks, brokers and other fiduciaries.
For a discussion of outstanding warrants and other securities exercisable for or convertible into shares of our common stock, see Notes 8 and 9 under Item 8 in this Amended Annual Report.
Dividends
We have never declared or paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain all available funds and future earnings, if any, to support operations and finance the growth and development of our business. Any future determination related to our dividend policy will be made at the discretion of our board of directors.
Securities authorized for issuance under equity compensation plans
The table below shows, as of June 30, 2021, information for equity compensation plans previously approved by stockholders and for compensation plans not previously approved by stockholders.
Plan Category |
|
Number of securities |
|
|
Weighted-average |
|
|
Number of securities |
|
|||
Equity compensation plans approved by security holders (1) |
|
|
16,900,192 |
|
|
$ |
3.01 |
|
|
|
10,472,864 |
|
Equity compensation plans not approved by security holders (2) |
|
|
169,000 |
|
|
|
2.85 |
|
|
|
2,331,000 |
|
Total |
|
|
17,069,192 |
|
|
$ |
3.01 |
|
|
|
12,803,864 |
|
47
Item 6. Selected Financial Data
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with “Item 8. Financial Statements and Supplementary Data” included below in this Amended Annual Report. Operating results are not necessarily indicative of results that may occur in future periods.
This discussion and analysis contains forward-looking statements that involve a number of risks, uncertainties and assumptions. Actual results may differ materially from those anticipated in the forward-looking statements as a result of many factors including, but not limited to, those set forth under “Cautionary Statement About Forward-Looking Statements” and “Risk Factors” in Item 1A. included above in this Amended Annual Report. All forward-looking statements included in this Amended Annual Report are based on the information available to us as of the time we file this Amended Annual Report, and except as required by law, we undertake no obligation to update publicly or revise any forward-looking statements.
The following information has been adjusted to reflect the restatement of our financial statements as described in the Explanatory Note at the beginning of this Amended Annual Report and in Note 1, "Restatement of Previously Issued Financial Statements," in Notes to Financial Statements of this Amended Annual Report.
Overview
We are a late-stage pharmaceutical company committed to the development and commercialization of novel cancer therapies intended to improve outcomes for patients. MEI Pharma's portfolio of drug candidates includes four clinical-stage assets, including zandelisib (f/k/a ME-401), currently in multiple ongoing clinical studies intended to support marketing applications with the U.S. Food and Drug Administration (“FDA”) and other regulatory authorities globally. Our common stock is listed on the Nasdaq Capital Market under the symbol “MEIP.”
Clinical Development Programs
We build our pipeline by licensing promising cancer agents and creating value in programs through development, commercialization and strategic partnerships, as appropriate. Our objective is to leverage the mechanisms and properties of our pipeline drug candidates to optimize the balance between efficacy and tolerability to meet the needs of patients with cancer. Our drug candidate pipeline includes:
48
Recent Developments
For a more complete discussion of our business, see the section of this Amended Annual Report “Item 1- Business” above.
Equity Transactions
Shelf Registration Statement
We have a shelf registration statement that permits us to sell, from time to time, up to $200.0 million of common stock, preferred stock and warrants. The shelf registration was filed and declared effective in May 2020, replacing our prior shelf registration statement that was filed and declared effective in May 2017, and carrying forward approximately $107.5 million of unsold securities registered under the prior shelf registration statement. As of June 30, 2021, there is $175.7 million aggregate value of securities available under the shelf registration statement, including up to $60.0 million remaining available under the 2020 ATM Sales Agreement described below.
At-The-Market Equity Offering
On November 10, 2020, we entered into an At-The-Market Equity Offering Sales Agreement (the “2020 ATM Sales Agreement”), pursuant to which we may sell an aggregate of up to $60.0 million of our common stock pursuant to the shelf registration statement. We had previously entered into an At-The-Market Equity Offering Sales Agreement in November 2017 (the “2017 ATM Sales Agreement”), pursuant to which we could sell an aggregate of up to $30.0 million of our common stock pursuant to the shelf registration statement. The 2017 ATM Sales Agreement expired on November 8, 2020. During the year ended June 30, 2021, we sold 958,083 shares under the 2017 ATM Sales Agreement for net proceeds of $3.1 million, after costs of $0.1 million. During the year ended June 30, 2020, we also sold 5,471,684 shares under the 2017 ATM Sales Agreement for net proceeds of $20.7 million, after costs of $0.4 million. As of June 30, 2021, there is $60.0 million remaining available under the 2020 ATM Sales Agreement.
Underwritten Registered Offering
In December 2019, we completed an underwritten registered offering of 32,343,750 shares of common stock at a price per share of $1.60. We received net cash proceeds of $48.5 million associated with the offering, after costs of $3.3 million.
Warrants
As of June 30, 2021, we have outstanding warrants to purchase 16,058,985 shares of our common stock. The warrants are fully vested, exercisable at a price of $2.54 per share and expire in May 2023. Pursuant to the terms of the warrants, we could be required to settle the warrants in cash in the event of an acquisition of the Company and, as a result, the warrants are required to be measured at fair value and reported as a liability in the Balance Sheet. Therefore, we are required to account for the warrants as liabilities and record them at fair value. The warrants were revalued as of June 30, 2021 at $22.4 million and as of June 30, 2020 at $40.5 million; the changes in fair value were recorded in our Statement of Operations. During the year ended June 30, 2021, a warrant holder completed a cashless exercise of 2,617 warrants for 964 shares of common stock. No warrants were exercised during the year ended June 30, 2020.
Critical Accounting Policies and Management Estimates
Management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and related disclosures. Actual results could differ from those estimates. We believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers (“Topic 606”)
We recognize revenue when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. For enforceable contracts with our customers, we first identify the distinct performance obligations – or accounting units – within the contract. Performance obligations are commitments in a contract to transfer a distinct good or service to the customer.
Payments received under commercial arrangements, such as licensing technology rights, may include non-refundable fees at the inception of the arrangements, cost reimbursements, milestone payments for specific achievements designated in the agreements, and royalties on the sale of products. At the inception of arrangements that include variable consideration, we use judgment to estimate the amount of variable consideration to include in the transaction price using the most likely method. If it is probable that a significant revenue reversal will
49
not occur, the estimated amount is included in the transaction price. Milestone payments that are not within our or the licensee’s control, such as regulatory approvals, are not included in the transaction price until those approvals are received. At the end of each reporting period, we re-evaluate estimated variable consideration included in the transaction price and any related constraint and, as necessary, we adjust our estimate of the overall transaction price. Any adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.
We develop estimates of the stand-alone selling price for each distinct performance obligation. Variable consideration that relates specifically to our efforts to satisfy specific performance obligations is allocated entirely to those performance obligations. Other components of the transaction price are allocated based on the relative stand-alone selling price, over which management has applied significant judgment. We develop assumptions that require judgment to determine the stand-alone selling price for license-related performance obligations, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical, regulatory and commercial success. We estimate stand-alone selling price for research and development performance obligations by forecasting the expected costs of satisfying a performance obligation plus an appropriate margin.
In the case of a license that is a distinct performance obligation, we recognize revenue allocated to the license from non-refundable, up-front fees at the point in time when the license is transferred to the licensee and the licensee can use and benefit from the license. For licenses that are bundled with other distinct or combined obligations, we use judgment to assess the nature of the performance obligation to determine whether the performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. If the performance obligation is satisfied over time, we evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. From time to time, we perform additional services for KKC at their request, the costs of which are fully reimbursed to us. We record the reimbursement for such pass through services as revenue at 100% of reimbursed costs as control of the additional services for KKC is transferred at the time we incur such costs. The costs we incur for these additional services are incurred solely for the benefit of KKC and have no alternative use to us.
The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. Revenue is recorded proportionally as costs are incurred. We generally use the cost-to-cost measure of progress because it best depicts the transfer of control to the customer which occurs as we incur costs. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation (an “input method” under Topic 606). We use judgment to estimate the total cost expected to complete the research and development performance obligations, which include subcontractors’ costs, labor, materials, other direct costs and an allocation of indirect costs. We evaluate these cost estimates and the progress each reporting period and, as necessary, we adjust the measure of progress and related revenue recognition.
For arrangements that include sales-based or usage-based royalties, we recognize revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied. To date, we have not recognized any sales-based or usage-based royalty revenue from license agreements.
We recognized revenue associated with the following license agreements (in thousands):
|
|
Years Ended June 30, |
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
|
|
|||
|
|
(As Restated) |
|
|
(As Restated) |
|
|
2019 |
|
|||
License Agreement: |
|
|
|
|
|
|
|
|
|
|||
KKC Agreements |
|
$ |
34,356 |
|
|
$ |
26,386 |
|
|
$ |
2,557 |
|
Helsinn License Agreement |
|
|
440 |
|
|
|
1,370 |
|
|
|
2,358 |
|
|
|
$ |
34,796 |
|
|
$ |
27,756 |
|
|
$ |
4,915 |
|
Timing of Revenue Recognition: |
|
|
|
|
|
|
|
|
|
|||
Services performed over time |
|
$ |
31,302 |
|
|
$ |
6,768 |
|
|
$ |
4,036 |
|
Pass through services at a point in time |
|
|
3,494 |
|
|
|
— |
|
|
|
— |
|
License transferred at a point in time |
|
|
— |
|
|
|
20,988 |
|
|
|
879 |
|
|
|
$ |
34,796 |
|
|
$ |
27,756 |
|
|
$ |
4,915 |
|
The KKC Commercialization Agreement and KKC Japan License Agreement (Note 2) included other distinct performance obligations satisfied over time, and accordingly we recognized $34.4 million, $26.4 million and $2.6 million related to our progress toward satisfying those obligations during the years ended June 30, 2021, 2020 and 2019, respectively.
Based on the characteristics of the Helsinn License Agreement (Note 4), control of the remaining deliverables occurs and therefore we recognized revenue based on the extent of progress towards completion of the performance obligations. Accordingly, we recognized $0.4 million, $1.4 million and $2.3 million related to our progress toward satisfying those obligations during the years ended June 30, 2021, 2020
50
and 2019, respectively. As of June 30, 2021, our performance obligations related to the Helsinn License Agreement have been met and no future revenue or cost of revenue will be recognized.
Contract Balances
Receivables are included in our balance sheet in “Prepaid expenses and other current assets”, and contract liabilities are included in “Deferred revenue” and “Deferred revenue, long-term”. The following table presents changes in receivables, unbilled receivables, and contract liabilities accounted for under Topic 606 during the years ended June 30, 2021 and 2020 (in thousands).:
|
|
Years Ended June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(As Restated) |
|
|
(As Restated) |
|
||
Accounts receivable |
|
|
|
|
|
|
||
Accounts receivable, beginning of year |
|
$ |
83 |
|
|
$ |
— |
|
Amounts billed |
|
|
25,682 |
|
|
|
1,292 |
|
Payments received |
|
|
(25,765 |
) |
|
|
(1,209 |
) |
Accounts receivable, end of year |
|
$ |
— |
|
|
$ |
83 |
|
Unbilled receivables |
|
|
|
|
|
|
||
Unbilled receivables, beginning of year |
|
$ |
2,858 |
|
|
$ |
511 |
|
Billable amounts |
|
|
30,406 |
|
|
|
3,639 |
|
Amounts billed |
|
|
(25,682 |
) |
|
|
(1,292 |
) |
Unbilled receivables, end of year |
|
$ |
7,582 |
|
|
$ |
2,858 |
|
Contract liabilities |
|
|
|
|
|
|
||
Contract liabilities, beginning of year |
|
$ |
19,108 |
|
|
$ |
7,774 |
|
Revenue recognized |
|
|
(4,798 |
) |
|
|
(25,234 |
) |
Payments received |
|
|
367 |
|
|
|
36,568 |
|
Contract liabilities, end of year |
|
$ |
14,677 |
|
|
$ |
19,108 |
|
The timing of revenue recognition, invoicing and cash collections results in billed accounts receivable and unbilled receivables, and deferred revenue (contract liabilities). We invoice our customers in accordance with agreed-upon contractual terms, typically at periodic intervals or upon achievement of contractual milestones. Invoicing may occur subsequent to revenue recognition, resulting in contract assets. We may receive advance payments from our customers before revenue is recognized, resulting in contract liabilities. The unbilled receivables and contract liabilities reported on the Balance Sheets relate to the KKC Commercialization Agreement, the KKC Japan License Agreement and Helsinn License Agreement.
As of June 30, 2021, we had $7.6 million of unbilled receivables related to our remaining performance obligations under the KKC Commercialization Agreement and no unbilled receivables related to the Helsinn License Agreement, as the remaining performance obligations have been completed. Our unbilled receivables are comprised of amounts that are billable based on the contractual provisions of the license agreement but not yet billed.
As of June 30, 2021, we had $79.2 million of deferred revenue associated with the KKC Commercialization Agreement, of which $64.5 million relates to the U.S. license which is a unit of account under the scope of Topic 808 and is not a deliverable under Topic 606, and $14.7 million relates to the development services performance obligations which are under the scope of Topic 606.
Our contract liabilities accounted for under Topic 606 relate to the amount of initial upfront consideration that was allocated to the development services performance obligations. Contract liabilities are recognized over the duration of the performance obligations based on the costs incurred relative to total expected costs.
Revenues from Collaborators
We earn revenue in connection with collaboration agreements, which are described in Note 2, KKC Agreements.
At contract inception, we assess whether the collaboration arrangements are within the scope of ASC Topic 808, Collaborative Arrangements (“Topic 808”), to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities. This assessment is performed based on the responsibilities of all parties in the arrangement. For collaboration arrangements within the scope of Topic 808 that contain multiple units of account, we first determine which units of account within the arrangement are within the scope of Topic 808 and which elements are within the scope of Topic 606. For units of account within collaboration arrangements that are accounted for pursuant to Topic 808, an appropriate recognition method is determined and applied consistently, by analogy to authoritative accounting literature. For units of account within collaboration arrangements that are accounted for pursuant to Topic 606, we recognize revenue as discussed above. Consideration received that does not meet the requirements to satisfy Topic 606 revenue recognition criteria is recorded as
51
deferred revenue in the accompanying balance sheets, classified as either short-term or long-term deferred revenue based on our best estimate of when such amounts will be recognized.
Research and Development Costs
Research and development costs are expensed as incurred and include costs paid to third-party contractors to perform research, conduct clinical trials and develop and manufacture drug materials. Clinical trial costs, including costs associated with third-party contractors, are a significant component of research and development expenses. We expense research and development costs based on work performed. In determining the amount to expense, management relies on estimates of total costs based on contract components completed, the enrollment of subjects, the completion of trials, and other events. Costs incurred related to the purchase or licensing of in-process research and development for early-stage products or products that are not commercially viable and ready for use, or have no alternative future use, are charged to expense in the period incurred.
Share-Based Compensation
Share-based compensation expense for employees and directors is recognized in the Statement of Operations based on estimated amounts, including the grant date fair value and the expected service period. For stock options, we estimate the grant date fair value using a Black-Scholes valuation model, which requires the use of multiple subjective inputs including estimated future volatility, expected forfeitures and the expected term of the awards. We estimate the expected future volatility based on the stock’s historical price volatility. The stock’s future volatility may differ from the estimated volatility at the grant date. For restricted stock unit (“RSU”) equity awards, we estimate the grant date fair value using our closing stock price on the date of grant. We recognize the effect of forfeitures in compensation expense when the forfeitures occur. The estimated forfeiture rates may differ from actual forfeiture rates which would affect the amount of expense recognized during the period. We recognize the value of the awards over the awards’ requisite service or performance periods. The requisite service period is generally the time over which our share-based awards vest.
Warrant Liability
In May 2018, we issued warrants in connection with our private placement of shares of common stock. Pursuant to the terms of the warrants, we could be required to settle the warrants in cash in the event of an acquisition of the Company and, as a result, the warrants are required to be measured at fair value and reported as a liability in the balance sheet. We recorded the fair value of the warrants upon issuance using the Black-Scholes valuation model, and are required to revalue the warrants at each reporting date with any changes in fair value recorded on our statement of operations. Inputs used to determine estimated fair value of the warrant liabilities include the estimated fair value of the underlying stock at the valuation date, the estimated term of the warrants, risk-free interest rates, expected dividends and the expected volatility of the underlying stock.
Leases
Effective July 1, 2019, we adopted FASB ASC Topic 842, Leases (“ASC 842”), using a modified retrospective basis method under which prior comparative periods are not restated. This standard requires lessees to recognize in the statement of financial position a liability to make lease payments and a right-of-use (“ROU”) asset representing our right to use the underlying asset for the lease term. At the inception of an arrangement, we determine whether the arrangement is or contains a lease based on the unique facts and circumstances within the arrangement. A lease is identified where an arrangement conveys the right to control the use of identified property, plant, and equipment for a period of time in exchange for consideration. Leases which are identified within the scope of ASC 842 and which have a term greater than one year are recognized on our Balance Sheet as ROU assets and lease liabilities. Operating lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected remaining lease term. The lease term includes any renewal options and termination options that we are reasonably certain to exercise. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received. The present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, we use our incremental borrowing rate. The incremental borrowing rate is determined based on the rate of interest that we would pay to borrow on a collateralized basis an amount equal to the lease payments for a similar term and in a similar economic environment. The interest rate implicit in lease contracts to calculate the present value is typically not readily determinable. As such, significant management judgment is required to estimate the incremental borrowing rate.
Rent expense for operating leases is recognized on a straight-line basis over the lease term based on the total lease payments. We have elected the practical expedient to not separate lease and non-lease components for our real estate leases. Our non-lease components are primarily related to property maintenance, which varies based on future outcomes, and thus is recognized in rent expense when incurred.
Income Taxes
Our income tax expense consists of current and deferred income tax expense or benefit. Current income tax expense or benefit is the amount of income taxes expected to be payable or refundable for the current year. A deferred income tax asset or liability is recognized for the future tax consequences attributable to tax credits and loss carryforwards and to differences between the financial statement carrying amounts
52
of existing assets and liabilities and their respective tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of June 30, 2021 and 2020, we have established a valuation allowance to fully reserve our net deferred tax assets. Changes in our ownership may limit the amount of net operating loss carryforwards that can be utilized in the future to offset taxable income.
Results of Operations
The following information has been adjusted to reflect the restatement of our financial statements as described in the Explanatory Note at the beginning of this Amended Annual Report and in Note 1, Restatement of Previously Issued Financial Statements, in the Notes to Financial Statements of this Amended Annual Report.
Comparison of Years Ended June 30, 2021 and 2020
We had a loss from operations of $60.4 million for the year ended June 30, 2021 compared to a loss from operations of $25.7 million for the year ended June 30, 2020.
Revenue: We recognized revenue of $34.8 million for the year ended June 30, 2021 compared to $27.8 million for the year ended June 30, 2020. Revenue increased primarily due to our license agreement with KKC. Revenue related to the license agreement with KKC was $34.4 million for the year ended June 30, 2021 compared to $26.4 million for the year ended June 30, 2020. The increase in revenue was primarily due to an increase in reimbursement of expenses from KKC for the year ended June 30, 2021 ($27.5 million), offset by the transfer of the Ex-U.S. License ($21.0 million) for the year ended June 30, 2020. Revenue also includes recognition of fees allocated to performance obligations in accordance with the Helsinn License Agreement. Revenue related the Helsinn License Agreement was $0.4 million for the year ended June 30, 2021 compared to $1.4 million for the year ended June 30, 2020 due to decreased costs related to the POC study. As of June 30, 2021, our performance obligations related to the Helsinn License Agreement have been met and no future revenue or cost of revenue will be recognized.
Cost of Revenue: We recognized cost of revenue of $1.4 million for the year ended June 30, 2021 compared to $2.7 million for the year ended June 30, 2020. The cost of revenue includes external costs paid to third-party contractors to perform research, conduct clinical trials and develop and manufacture drug materials, and internal compensation and related personnel expenses associated with pracinostat. Costs of revenue relate to expenses for pracinostat incurred in connection with our development activities in accordance with the Helsinn License Agreement, including both Helsinn’s share and our share of costs related to the POC study, which we are responsible for conducting. Cost of revenue decreased due to decreased costs related to the POC study.
Research and Development: The following is a summary of our research and development expenses to supplement the more detailed discussion below. The dollar values in the following table are in thousands.
|
|
Years Ended June 30, |
|
|||||
Research and development expenses |
|
2021 |
|
|
2020 |
|
||
Zandelisib |
|
$ |
46,052 |
|
|
$ |
17,356 |
|
Voruciclib |
|
|
2,939 |
|
|
|
1,946 |
|
ME-344 |
|
|
960 |
|
|
|
62 |
|
Other |
|
|
19,447 |
|
|
|
14,701 |
|
Total research and development expenses |
|
$ |
69,398 |
|
|
$ |
34,065 |
|
Research and development expenses consist primarily of clinical trial costs (including payments to contract research organizations “CROs”), pre-clinical study costs, and costs to manufacture our drug candidates for non-clinical and clinical studies. Other research and development expenses consist primarily of salaries and personnel costs, share-based compensation, legal costs, and other costs not allocated to specific drug programs. Research and development expenses were $69.4 million for the year ended June 30, 2021 compared to $34.1 million for the year ended June 30, 2020. Costs related to zandelisib for the year ended June 30, 2021 reflected an increase in clinical trial costs ($22.1 million) primarily as a result of start-up costs related to the Phase 3 study, an increase in drug manufacturing costs ($4.3 million), and increased consulting fees ($1.8 million). Costs related to voruciclib increased for the year ended June 30, 2021 compared with the year ended June 30, 2020, due to increased drug manufacturing costs. Cost related to ME-344 increased for the year ended June 30, 2021 compared with the year ended June 30, 2020 due to increased drug manufacturing costs. Other research and development costs increased for the year ended June 30, 2021 due to higher levels of personnel costs ($3.0 million) and share-based compensation ($1.4 million) associated with increased headcount to support our clinical activities.
General and Administrative: General and administrative expenses increased by $7.7 million to $24.4 million for the year ended June 30, 2021 compared to $16.7 million for the year ended June 30, 2020. The increase is primarily due to increased external professional services and legal costs ($2.9 million), as well as share-based compensation ($2.1 million) and personnel costs ($1.4 million) associated with increased headcount to support our activities, including preparation for commercial launch of zandelisib, and corporate overhead costs ($1.3 million).
53
Other income or expense: We recorded a non-cash gain of $18.1 million during the year ended June 30, 2021 and a non-cash expense of $22.9 million for the year ended June 30, 2020 due to a change in the fair value of our warrant liability for warrants issued in connection with our private placement of shares of common stock. The change in the warrant liability is primarily due to changes in our stock price. Additionally, we received interest and dividend income of $0.5 million for the year ended June 30, 2021 compared to $1.4 million for the year ended June 30, 2020. The decrease was due to lower yields on cash equivalents and short-term investments during the year ended June 30, 2021 compared to the year ended June 30, 2020.
Comparison of Years Ended June 30, 2020 and 2019
We have omitted discussion of the results of operations for the fiscal year ended June 30, 2019 because it would be redundant to the discussion previously included in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended June 30, 2020, filed with the SEC on September 9, 2020.
New Accounting Pronouncements
See Note 1 to the Financial Statements included in Item 8 of this Amended Annual Report.
Off-Balance Sheet Arrangements
We do not currently have any off-balance-sheet arrangements.
Liquidity and Capital Resources
We have accumulated losses of $319.7 million since inception and expect to incur operating losses and generate negative cash flows from operations for the foreseeable future. As of June 30, 2021, we had $153.4 million in cash and cash equivalents, and short-term investments. We believe that these resources will be sufficient to fund our operations for at least 12 months from the issuance of this Amended Annual Report. Our current business operations are focused on continuing the clinical development of our drug candidates. Changes to our research and development plans or other changes affecting our operating expenses may affect actual future use of existing cash resources. Our research and development expenses are expected to increase in the foreseeable future. We cannot determine with certainty costs associated with ongoing and future clinical trials or the regulatory approval process. The duration, costs and timing associated with the development of our product candidates will depend on a variety of factors, including uncertainties associated with the results of our clinical trials.
To date, we have obtained cash and funded our operations primarily through equity financings and license agreements. In order to continue the development of our drug candidates, at some point in the future we expect to pursue one or more capital transactions, whether through the sale of equity securities, debt financing, license agreements or entry into strategic partnerships. There can be no assurance that we will be able to continue to raise additional capital in the future.
Sources and Uses of Our Cash
Net cash used in operations for the year ended June 30, 2021 was $32.0 million ($52.4 million, net of $20.4 million received from the Japanese government for tax withholdings). Net cash provided by operations for the year ended June 30, 2020 was $34.3 million (net cash used in operations was $45.3 million, net of a $79.6 million license fee received from KKC). Net cash used in operating activities for the year ended June 30, 2019 was $29.4 million ($39.4 million, net of a $10.0 million license fee received from KKC). The increase in cash used in operating activities year over year is due to increased research and development activities (as described above) as well as other changes in working capital.
Net cash provided by investing activities for the year ended June 30, 2021 was $24.7 million compared to $106.3 million used in investing activities for the year ended June 30, 2020. The change was primarily due to higher maturities of short-term investments in 2021, net of purchases. Net cash used in investing activities for the year ended June 30, 2019 was $24.3 million.
Net cash provided by financing activities during the year ended June 30, 2021 was $3.5 million compared with $74.8 million provided by financing activities during the year ended June 30, 2020. Cash raised during the year ended June 30, 2021 reflected the $3.1 million of net proceeds from the issuance of common stock. Cash raised during the year ended June 30, 2020 reflected $69.2 million of net proceeds from the issuance of common stock. Cash raised during the year ended June 30, 2019 reflected $1.1 million of proceeds from the exercise of warrants.
54
Contractual Obligations
We have contracted with various consultants and third parties to assist us in pre-clinical research and development and clinical trials work for our leading drug compounds. The contracts are terminable at any time, but obligate us to reimburse the providers for any time or costs incurred through the date of termination. Additionally, we have employment agreements with certain of our current employees that provide for severance payments and accelerated vesting for share-based awards if their employment is terminated under specified circumstances.
We have leased approximately 32,800 square feet of office space in San Diego, California. The contractual lease term is from July 2020 through March 2028. The average annual lease payments over the term of the lease will approximate $1.6 million, plus a pro rata share of certain building expenses. Our total contractual obligation over the term of the lease is approximately $10.7 million.
Presage License Agreement
In September 2017, we entered into the Presage License Agreement. Under the terms of the Presage License Agreement, Presage granted to us exclusive worldwide rights to develop, manufacture and commercialize voruciclib, a clinical-stage, oral and selective CDK inhibitor, and related compounds. In exchange, we paid Presage $2.9 million. With respect to the first indication, an incremental $2.0 million payment, due upon dosing the first subject in the first registration trial will be owed to Presage, for total payments of $4.9 million prior to receipt of marketing approval of the first indication in the U.S., E.U. or Japan. Additional potential payments of up to $179 million will be due upon the achievement of certain development, regulatory and commercial milestones. We will also pay mid-single-digit tiered royalties on the net sales of any product successfully developed. As an alternative to milestone and royalty payments related to countries in which we sublicense product rights, we will pay to Presage a tiered percent (which decreases as product development progresses) of amounts received from such sublicensees. As of June 30, 2021, we had not accrued any amounts for potential future payments.
S*Bio Purchase Agreement
We are party to a definitive asset purchase agreement with S*Bio, pursuant to which we acquired certain assets comprised of intellectual property and technology including rights to pracinostat. We agreed to make certain milestone payments to S*Bio based on the achievement of certain clinical, regulatory and net sales-based milestones, as well as to make certain contingent earnout payments to S*Bio. Milestone payments will be made to S*Bio up to an aggregate amount of $75.2 million if certain U.S., E.U. and Japanese regulatory approvals are obtained and if certain net sales thresholds are met in North America, the E.U. and Japan. The first milestone payment of $200,000 plus 166,527 shares of our common stock having a value of $500,000 was paid in August 2017 upon the first dosing of a patient in a Phase 3 clinical trial. Subsequent milestone payments will be due upon certain regulatory approvals and sales-based events. As of June 30, 2021, we had not accrued any amounts for potential future payments.
COVID-19
As a result of the ongoing and rapidly evolving COVID-19 pandemic, various public health orders and guidance measures have been implemented across much of the United States, and across the globe, including in the locations of our office, clinical trial sites, key vendors and partners. Despite the relaxation of many governmental orders earlier this year, COVID-19 still impacts the normal conduct of business. In addition, although the FDA authorized vaccines for the treatment of COVID-19, and although a significant portion of the U.S. population has been vaccinated, the vaccination rate of the population and the effectiveness of the vaccines, particularly with respect to the COVID-19 Delta variant, as well as other variants, continues to create uncertainty. Furthermore, the COVID-19 virus may continue to mutate into different strains, which could be more contagious or severe or for which current vaccines and treatments are not effective or available.
While we continue to enroll and dose patients in our clinical trials, our clinical development program timelines may continue to be subject to potential negative impacts from the ongoing pandemic in the U.S. and globally. The extent to which the ongoing pandemic continues to impact our business, including our preclinical studies, CMC studies, manufacturing, and clinical trials, will depend on future developments, which are highly uncertain and cannot be predicted with confidence.
We may experience enrollment delays and suspensions, patient withdrawals, postponement of planned clinical or preclinical studies, redirection of site resources from studies, and study deviations or noncompliance. We may also need to maintain or implement study modifications, suspensions, or terminations, the introduction of additional remote study procedures and modified informed consent procedures, study site changes, direct delivery of investigational products to patient homes or alternative sites, which may require state licensing, and changes or delays in site monitoring. The foregoing may require that we consult with relevant review and ethics committees, Institutional Review Boards (“IRBs”), and the FDA. The foregoing may also impact the integrity of our study data. The COVID-19 outbreak may further increase the need for clinical trial patient monitoring and regulatory reporting of adverse effects, and may delay regulatory authority meetings, inspections, or the regulatory review of marketing or investigational applications or submissions.
The COVID-19 pandemic may also impact our ability to procure the necessary supply of our investigational drug products, as well as any ancillary supplies necessary for the conduct of our studies. Third party manufacturers may also need to implement measures and changes, or deviate from typical manufacturing requirements that may otherwise adversely impact our product candidates.
55
In light of the COVID-19 outbreak, the FDA issued a number of new guidance documents. Specifically, as a result of the potential effect of the COVID-19 outbreak on many clinical trial programs in the U.S. and globally, the FDA issued guidance concerning potential impacts on clinical trial programs, which guidance FDA has continually updated. In addition, the European Medicines Agency (“EMA”) as well as various country regulatory authorities (EU and UK) have issued similar guidance. We have adapted the FDA and EMA/UK guidance for study procedures, data collection, and oversight resulting from the pandemic.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
Our exposure to market interest rates relates primarily to the investments of cash balances and short-term investments. We have cash reserves held in U.S. dollars and we place funds on deposit with financial institutions, which are readily available. Our short-term investments consist solely of U.S. government securities with a maturity of three to twelve months.
We place our cash deposits with high credit quality financial institutions and by policy limit the amount of credit exposure to any one corporation or bank. These deposits are in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. We are adverse to principal loss and we ensure the safety and preservation of our invested funds by limiting default risk, market risk and reinvestment risk. We seek to mitigate default risk by depositing funds with high credit quality financial institutions, by limiting the amount of credit exposure to any one corporation or bank, by purchasing short-term investments consisting of U.S. government securities, and by positioning our portfolio to respond appropriately to a significant reduction in a credit rating of any such financial institution.
We do not consider the effects of interest rate movements to be a material risk to our financial condition.
56
Item 8. Financial Statements and Supplementary Data
MEI Pharma, Inc.
Index to Financial Statements
|
|
|
|
|
|
|
58 |
|
|
|
|
60 |
|
|
|
|
61 |
|
|
|
|
62 |
|
|
|
|
63 |
|
|
|
|
64 |
|
57
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and Board of Directors
MEI Pharma, Inc.
San Diego, California
Opinion on the Financial Statements
We have audited the accompanying balance sheets of MEI Pharma, Inc. (the “Company”) as of June 30, 2021 and 2020, the related statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended June 30, 2021 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at June 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2021, in conformity with accounting principles generally accepted in the United States of America.
Restatement to Correct 2021 and 2020 Errors
As discussed in Note 1 to the financial statements, the Company's 2021 and 2020 financial statements have been restated to correct errors.
Change in Accounting Method Related to Leases
As discussed in Note 1A to the financial statements, the Company has changed its method of accounting for leases during the year ended June 30, 2020 due to the adoption of Accounting Standards Codification Topic 842: “Leases”.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Assessment of accrued pre-clinical and clinical trial expenses
As described in Note 7 of the financial statements as of June 30, 2021, the Company had accrued $4.0 million for pre-clinical and clinical trial expenses. As described in Note 1A of the financial statements, research and development costs are expensed as incurred and include costs paid to third-party contractors to perform research, conduct clinical trials and develop and manufacture drug materials. Clinical trial costs, including costs associated with third-party contractors, are a significant component of research and development expenses. The Company expenses research and development costs based on work performed. In determining the amount of accrued pre-clinical and clinical trial expenses, management relies on estimates of total costs based on contract components completed, the enrollment of subjects, the completion of trials, and other events.
We identified the estimation of accrued pre-clinical and clinical trial expenses as a critical audit matter. Evaluating the progress or stage of completion of the activities under the Company’s research and development agreements is dependent upon different points of data from
58
third-party service providers and internal clinical personnel. Additionally, due to the duration of clinical-related development activities, the estimate of accrued pre-clinical and clinical trial expenses incurred requires judgment based on the nature and amounts of ongoing activities, the status of each activity, and the estimated progress for each key activity. Auditing these elements involved especially challenging and subjective auditor judgment due to the nature and extent of auditor effort required to address the matter.
The primary procedures we performed to address this critical audit matter included:
Cost estimates for KKC licensing agreement
As described in Note 1A of the financial statements, the Company recognizes revenue when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration to which they expect to be entitled to in exchange for those goods or services. For performance obligations that are satisfied over time, including certain research and development activities, the Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. The Company uses the cost-to-cost measure of progress whereby progress is measured based on the ratio of costs incurred to date compared to the total estimated costs. The Company uses judgment to estimate the total cost expected to complete the research and development performance obligations.
We have identified management’s estimates of the measure of progress and total costs expected to complete the KKC license agreement as a critical audit matter. Evaluating the progress of the activities under the KKC license agreement is dependent upon different points of data from third-party service providers and internal clinical personnel. Additionally, due to the duration of the KKC license agreement, the estimate of accrued pre-clinical and clinical trial expenses incurred requires judgment based on the nature and amounts of ongoing activities, the status of each project, and the estimated progress for each key trial. Auditing these elements involved especially challenging and subjective auditor judgment due to the nature and extent of auditor effort required to address the matter.
The primary procedures we performed to address this critical audit matter included:
/s/ BDO USA, LLP
We have served as the Company’s auditor since 2011.
San Diego, California
September 2, 2021, except for the effects of the restatement disclosed in Note 1, Revenue Recognition and Net Loss Per Share paragraphs of Note 1A, Note 2 and Note 13 which is dated May 23, 2022
59
MEI PHARMA, INC.
BALANCE SHEETS
(In thousands, except per share amounts)
|
|
June 30, |
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|||||
|
|
2021 |
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2020 |
|
||
|
|
(As Restated) |
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(As Restated) |
|
||
ASSETS |
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|
||
Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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||
Short-term investments |
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Total cash, cash equivalents and short-term investments |
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Receivable for foreign tax withholding |
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Unbilled receivables |
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Prepaid expenses and other current assets |
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Total current assets |
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Operating lease right-of-use asset |
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|
||
Property and equipment, net |
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|
||
Total assets |
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$ |
|
|
$ |
|
||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
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|
||
Current liabilities: |
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|
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Accounts payable |
|
$ |
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$ |
|
||
Accrued liabilities |
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Deferred revenue |
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||
Operating lease liability |
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Total current liabilities |
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Deferred revenue, long-term |
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Operating lease liability, long-term |
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||
Warrant liability |
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|
||
Total liabilities |
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||
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|
|||
Stockholders’ equity: |
|
|
|
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|
||
Preferred stock, $ |
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|
||
Common stock, $ |
|
|
|
|
|
|
||
Additional paid-in-capital |
|
|
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|
||
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Total stockholders’ equity |
|
|
|
|
|
|
||
Total liabilities and stockholders’ equity |
|
$ |
|
|
$ |
|
See accompanying notes to financial statements.
60
MEI PHARMA, INC.
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
|
|
Years Ended June 30, |
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|||||||||
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2021 |
|
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2020 |
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|
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|
|||
|
|
(As Restated) |
|
|
(As Restated) |
|
|
2019 |
|
|||
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Operating expenses: |
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|
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|
|||
Cost of revenue |
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|
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Research and development |
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General and administrative |
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Total operating expenses |
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|
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|
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|
|||
Loss from operations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other income (expense): |
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|
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|
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|
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|
|||
Change in fair value of warrant liability |
|
|
|
|
|
( |
) |
|
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|
||
Interest and dividend income |
|
|
|
|
|
|
|
|
|
|||
Other income |
|
|
|
|
|
— |
|
|
|
— |
|
|
Income tax expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss: |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss per share: |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Shares used in computing net loss per share: |
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|
|
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|
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|
|||
Basic |
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Diluted |
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|
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|
See accompanying notes to financial statements.
61
MEI PHARMA, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Total |
|
||||
Balance at June 30, 2018 |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Issuance of common stock, net |
|
|
|
|
|
|
|
|
— |
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|
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|
|||
Exercise of warrants |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Issuance of common stock for vested restricted stock units |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Exercise of stock options |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Share-based compensation expense |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Balance at June 30, 2019 |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Net loss (As Restated) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Issuance of common stock, net |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Exercise of stock options |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Share-based compensation expense |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Balance at June 30, 2020 (As Restated) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Net loss (As Restated) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Issuance of common stock, net |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Exercise of warrants |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Exercise of stock options |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Share-based compensation expense |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Balance at June 30, 2021 (As Restated) |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
See accompanying notes to financial statements.
62
MEI PHARMA, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
|
|
Years Ended June 30, |
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
|
|
|||
|
|
(As Restated) |
|
|
(As Restated) |
|
|
2019 |
|
|||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash (used in) provided by |
|
|
|
|
|
|
|
|
|
|||
Change in fair value of warrant liability |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Share-based compensation |
|
|
|
|
|
|
|
|
|
|||
Impairment of intangible assets |
|
|
— |
|
|
|
|
|
|
— |
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|||
Receivable for foreign tax withholding |
|
|
|
|
|
( |
) |
|
|
— |
|
|
Unbilled receivables |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
|
|
|
( |
) |
|
|
|
||
Accrued liabilities |
|
|
|
|
|
|
|
|
|
|||
Deferred revenue |
|
|
( |
) |
|
|
|
|
|
|
||
Operating lease liability |
|
|
|
|
|
— |
|
|
|
— |
|
|
Net cash (used in) provided by operating activities |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Purchases of short-term investments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Proceeds from maturity of short-term investments |
|
|
|
|
|
|
|
|
|
|||
Net cash provided by (used in) investing activities |
|
|
|
|
|
( |
) |
|
|
|
||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|||
Proceeds from exercise of stock options |
|
|
|
|
|
|
|
|
|
|||
Issuance of common stock, net |
|
|
|
|
|
|
|
|
|
|||
Collection of common stock proceeds receivable |
|
|
— |
|
|
|
|
|
|
— |
|
|
Proceeds from exercise of warrants |
|
|
— |
|
|
|
— |
|
|
|
|
|
Payment of RSU tax withholdings in exchange for common shares |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Net cash provided by financing activities |
|
|
|
|
|
|
|
|
|
|||
Net (decrease) increase in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Cash and cash equivalents at beginning of the year |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents at end of the year |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|||
Income taxes paid |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Operating lease right-of-use assets obtained in exchange for operating lease liabilities |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
Non-cash financing activities: |
|
|
|
|
|
|
|
|
|
|||
Warrants issued pursuant to cashless exercise |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
Proceeds receivable - sale of common stock |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
Proceeds receivable - stock option exercises |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
Change in fair value of warrants exercised |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
See accompanying notes to financial statements.
63
MEI PHARMA, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
Note 1. Restatement of Previously Issued Financial Statements
MEI Pharma, Inc. has restated our previously issued financial statements and related disclosures as of and for the fiscal years ended June 30, 2021 and 2020 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the "SEC") on September 2, 2021 (the "Original Annual Report"), in order to correct errors resulting from the incorrect application of generally accepted accounting principles relating to revenue recognition as it pertains to the application of the cost-to-cost method for revenue recognition. The applicable Notes to Financial Statements were also updated to reflect the restatement. Our correction to accounting for revenue recognition did not have any effect on our previously reported operating expenses or cash and short-term investments.
Impact of Restatement
We identified and corrected certain errors in the manner in which we recognized revenue from our License, Development and Commercialization Agreement with Kyowa Kirin Company ("KKC") (the "KKC Commercialization Agreement") with the result that revenue was overstated in some quarters and understated in other quarters in our financial statements during 2020 and 2021. The errors relate to the appropriate timing and amounts of revenue recognized over time and under the cost-to-cost method associated with the KKC Commercialization Agreement (Note 2). As a result, we determined that there were errors in the financial statements that required a restatement of the June 20, 2021 and 2020 financial statements included in the Original Annual Report.
The following tables reflect the impact of the restatement adjustments to the specific line items presented in our previously reported financial statements for the annual periods indicated. These errors did not have any effect on our previously reported operating expenses, cash flows or cash and short-term investments. The amounts originally reported were derived from the Original Annual Report (in thousands, except per share amounts):
|
|
June 30, 2021 |
|
|||||||||
|
|
As Originally Reported |
|
|
Adjustments |
|
|
As Restated |
|
|||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|||
Deferred revenue |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Total current liabilities |
|
|
|
|
|
( |
) |
|
|
|
||
Deferred revenue, long-term |
|
|
|
|
|
|
|
|
|
|||
Total liabilities |
|
|
|
|
|
( |
) |
|
|
|
||
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|||
Accumulated deficit |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Total stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020 |
|
|||||||||
|
|
As Originally Reported |
|
|
Adjustments |
|
|
As Restated |
|
|||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|||
Deferred revenue |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Total current liabilities |
|
|
|
|
|
( |
) |
|
|
|
||
Deferred revenue, long-term |
|
|
|
|
|
|
|
|
|
|||
Total liabilities |
|
|
|
|
|
|
|
|
|
|||
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|||
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total stockholders’ equity |
|
|
|
|
|
( |
) |
|
|
|
64
|
|
Year Ended June 30, 2021 |
|
|||||||||
|
|
As Originally Reported |
|
|
Adjustments |
|
|
As Restated |
|
|||
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Loss from operations |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net loss |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net loss: |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Diluted |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net loss per share: |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Diluted |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
Year Ended June 30, 2020 |
|
|||||||||
|
|
As Originally Reported |
|
|
Adjustments |
|
|
As Restated |
|
|||
Revenue |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Loss from operations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net loss: |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Diluted |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net loss per share: |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Diluted |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
Year Ended June 30, 2021 |
|
|||||||||
|
|
As Originally Reported |
|
|
Adjustments |
|
|
As Restated |
|
|||
Statement of Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|||
Accumulated deficit |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Total stockholders' equity |
|
|
|
|
|
|
|
|
|
|
|
Year Ended June 30, 2020 |
|
|||||||||
|
|
As Originally Reported |
|
|
Adjustments |
|
|
As Restated |
|
|||
Statement of Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|||
Accumulated deficit |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Total stockholders' equity |
|
|
|
|
|
( |
) |
|
|
|
|
|
Year Ended June 30, 2021 |
|
|||||||||
|
|
As Originally Reported |
|
|
Adjustments |
|
|
As Restated |
|
|||
Statement of Cash Flows |
|
|
|
|
|
|
|
|
|
|||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|||
Net loss |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|||
Deferred revenue |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net cash used in operating activities |
|
|
( |
) |
|
|
|
|
|
( |
) |
65
|
|
Year Ended June 30, 2020 |
|
|||||||||
|
|
As Originally Reported |
|
|
Adjustments |
|
|
As Restated |
|
|||
Statement of Cash Flows |
|
|
|
|
|
|
|
|
|
|||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|||
Deferred revenue |
|
|
|
|
|
|
|
|
|
|||
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
Note 1A. The Company and Summary of Significant Accounting Policies
The Company
MEI Pharma, Inc. is a late-stage pharmaceutical company committed to the development and commercialization of novel cancer therapies intended to improve outcomes for patients. Our portfolio of drug candidates includes
Clinical Development Programs
We build our pipeline by licensing or acquiring promising cancer agents and creating value in programs through development, commercialization and strategic partnerships, as appropriate. Our objective is to leverage the mechanisms and properties of our pipeline drug candidates to optimize the balance between efficacy and tolerability to meet the needs of patients with cancer. Our drug candidate pipeline includes:
The results of pre-clinical studies and completed clinical trials are not necessarily predictive of future results, and our current drug candidates may not have favorable results in later studies or trials. The commercial opportunity will be reduced or eliminated if competitors develop and market products that are more effective, have fewer side effects or are less expensive than our drug candidates. We will need substantial additional funds to progress the clinical trial programs for the drug candidates zandelisib, voruciclib, and ME-344, and to develop new compounds. The actual amount of funds that will be needed are determined by a number of factors, some of which are beyond our control. Negative U.S. and global economic conditions may pose challenges to our business strategy, which relies on funding from the financial markets or collaborators.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosures made in the accompanying notes to the financial statements. We use estimates that affect the reported amounts (including assets, liabilities, revenues and expenses) and related disclosures. Actual results could materially differ from those estimates.
Liquidity
We have accumulated losses of $
66
To date, we have obtained cash and funded our operations primarily through equity financings and license agreements. In order to continue the development of our drug candidates, at some point in the future we expect to pursue one or more capital transactions, whether through the sale of equity securities, debt financing, license agreements or entry into strategic partnerships. There can be no assurance that we will be able to continue to raise additional capital in the future.
Reclassifications
Certain reclassifications have been made to the prior year financial statements to conform to the current year financial statement presentation of unbilled receivables. These changes did not impact previously reported net loss, loss per share, stockholders’ equity, total assets or cash flows.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid investments with original maturities of three months or less when purchased. Cash is maintained at financial institutions and, at times, balances may exceed federally insured limits. We have not experienced any losses related to these balances.
Short-Term Investments
Investments that have maturities of greater than three months but less than one year are classified as short-term investments. As of June 30, 2021 and 2020, our short-term investments consisted of $
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value is as follows:
We measure the following financial instruments at fair value on a recurring basis. The fair values of these financial instruments were as follows (in thousands):
|
|
June 30, 2021 |
|
|
June 30, 2020 |
|
||||||||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||||
Warrant liability |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
( |
) |
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
( |
) |
The carrying amounts of financial instruments such as cash equivalents, short-term investments and accounts payable approximate the related fair values due to the short-term maturities of these instruments. We invest our excess cash in financial instruments which are readily convertible into cash, such as money market funds and U.S. government securities. Cash equivalents, where applicable, and short-term investments are classified as Level 1 as defined by the fair value hierarchy.
In May 2018, we issued warrants in connection with our private placement of shares of common stock. Pursuant to the terms of the warrants, we could be required to settle the warrants in cash in the event of an acquisition of the Company and, as a result, the warrants are required to be measured at fair value and reported as a liability in the Balance Sheet. We recorded the fair value of the warrants upon issuance using the Black-Scholes valuation model and are required to revalue the warrants at each reporting date with any changes in fair value recorded on our Statement of Operations. The valuation of the warrants is considered under Level 3 of the fair value hierarchy due to the need to use assumptions in the valuation that are both significant to the fair value measurement and unobservable. Inputs used to determine estimated fair
67
value of the warrant liabilities include the estimated fair value of the underlying stock at the valuation date, the estimated term of the warrants, risk-free interest rates, expected dividends and the expected volatility of the underlying stock. The significant unobservable inputs used in the fair value measurement of the warrant liabilities were the volatility rate and the estimated term of the warrants. Generally, increases (decreases) in the fair value of the underlying stock and estimated term would result in a directionally similar impact to the fair value measurement. The change in the fair value of the Level 3 warrant liability is reflected in the Statement of Operations for the years ended June 30, 2021 and 2020.
To calculate the fair value of the warrant liability, the following assumptions were used:
|
|
June 30, |
|
|
June 30, |
|
||
Risk-free interest rate |
|
|
% |
|
|
% |
||
Expected life (years) |
|
|
|
|
|
|
||
Expected volatility |
|
|
% |
|
|
% |
||
Dividend yield |
|
|
% |
|
|
% |
||
Black-Scholes Fair Value |
|
$ |
|
|
$ |
|
The following table sets forth a summary of changes in the estimated fair value of our Level 3 warrant liability for the years ended June 30, 2021 and 2020 (in thousands):
|
|
Fair Value of Warrants Using Significant |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Balance at July 1, |
|
$ |
|
|
$ |
|
||
Reclassification of warrant liability to equity upon exercise of warrants |
|
|
( |
) |
|
|
— |
|
Change in estimated fair value of liability classified warrants |
|
|
( |
) |
|
|
|
|
Balance at June 30, |
|
$ |
|
|
$ |
|
Property and Equipment
Property and equipment are stated at cost and depreciated over the estimated useful lives of the assets (generally to
Leases
As of July 1, 2019, we adopted Topic 842, Leases, using a modified retrospective basis method under which prior comparative periods are not restated. The new standard establishes a ROU model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. We elected the following as practical expedients: 1) an entity need not reassess whether any expired or existing contracts are or contain leases, 2) an entity need not reassess the lease classification for any expired or existing leases, and 3) an entity need not reassess initial direct costs for any existing leases.
Rent expense for operating leases is recognized on a straight-line basis over the lease term based on the total lease payments. We have elected the practical expedient to not separate lease and non-lease components for our real estate leases. Our non-lease components are primarily related to property maintenance, which varies based on future outcomes, and thus is recognized in rent expense when incurred.
Revenue Recognition
Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers (“Topic 606”)
We recognize revenue when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. For enforceable contracts with our customers, we first identify the distinct performance obligations – or accounting units – within the contract. Performance obligations are commitments in a contract to transfer a distinct good or service to the customer.
Payments received under commercial arrangements, such as licensing technology rights, may include non-refundable fees at the inception of the arrangements, milestone payments for specific achievements designated in the agreements, and royalties on the sale of products. At the inception of arrangements that include milestone payments, we use judgment to evaluate whether the milestones are probable of being achieved and we estimate the amount to include in the transaction price using the most likely method. If it is probable that a significant revenue reversal will not occur, the estimated amount is included in the transaction price. Milestone payments that are not within our or the
68
licensee’s control, such as regulatory approvals, are not included in the transaction price until those approvals are received. At the end of each reporting period, we re-evaluate the probability of achievement of development milestones and any related constraint and, as necessary, we adjust our estimate of the overall transaction price. Any adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.
We develop estimates of the stand-alone selling price for each distinct performance obligation. Variable consideration that relates specifically to our efforts to satisfy specific performance obligations is allocated entirely to those performance obligations. Other components of the transaction price are allocated based on the relative stand-alone selling price, over which management has applied significant judgment. We develop assumptions that require judgment to determine the stand-alone selling price for license-related performance obligations, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical, regulatory and commercial success. We estimate stand-alone selling price for research and development performance obligations by forecasting the expected costs of satisfying a performance obligation plus an appropriate margin.
In the case of a license that is a distinct performance obligation, we recognize revenue allocated to the license from non-refundable, up-front fees at the point in time when the license is transferred to the licensee and the licensee can use and benefit from the license. For licenses that are bundled with other distinct or combined obligations, we use judgment to assess the nature of the performance obligation to determine whether the performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. If the performance obligation is satisfied over time, we evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. From time to time, we perform additional services for KKC at their request, the costs of which are fully reimbursed to us. We record the reimbursement for such pass through services as revenue at
The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. Revenue is recorded proportionally as costs are incurred. We generally use the cost-to-cost measure of progress because it best depicts the transfer of control to the customer which occurs as we incur costs. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation (an “input method” under Topic 606). We use judgment to estimate the total cost expected to complete the research and development performance obligations, which include subcontractors’ costs, labor, materials, other direct costs and an allocation of indirect costs. We evaluate these cost estimates and the progress each reporting period and, as necessary, we adjust the measure of progress and related revenue recognition.
For arrangements that include sales-based or usage-based royalties, we recognize revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied. To date, we have not recognized any sales-based or usage-based royalty revenue from license agreements.
We recognized revenue associated with the following license agreements (in thousands):
|
|
Years Ended June 30, |
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
|
|
|||
|
|
(As Restated) |
|
|
2019 |
|
||||||
License agreement: |
|
|
|
|
|
|
|
|
|
|||
KKC Agreements |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Helsinn License Agreement |
|
|
|
|
|
|
|
|
|
|||
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Timing of Revenue Recognition: |
|
|
|
|
|
|
|
|
|
|||
Services performed over time |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Pass through services at a point in time |
|
|
|
|
|
|
|
|
|
|||
License transferred at a point in time |
|
|
|
|
|
|
|
|
|
|||
|
|
$ |
|
|
$ |
|
|
$ |
|
The KKC Commercialization Agreement and KKC Japan License Agreement (Note 2) included other distinct performance obligations satisfied over time, and accordingly we recognized $
Based on the characteristics of the Helsinn License Agreement (Note 4), control of the remaining deliverables occurs and therefore we recognize revenue based on the extent of progress towards completion of the performance obligations. Accordingly, we recognized $
69
and 2019, respectively. As of June 30, 2021, our performance obligations related to the Helsinn License Agreement have been met and no future revenue or cost of revenue will be recognized.
Contract Balances
Receivables are included in our balance sheet in “Prepaid expenses and other current assets”, and contract liabilities are included in “Deferred revenue” and “Deferred revenue long-term”.
|
|
Years Ended June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(As Restated) |
|
|||||
Accounts receivable |
|
|
|
|
|
|
||
Accounts receivable, beginning of year |
|
$ |
|
|
$ |
|
||
Amounts billed |
|
|
|
|
|
|
||
Payments received |
|
|
( |
) |
|
|
( |
) |
Accounts receivable, end of year |
|
$ |
|
|
$ |
|
||
Unbilled receivables |
|
|
|
|
|
|
||
Unbilled receivables, beginning of year |
|
$ |
|
|
$ |
|
||
Billable amounts |
|
|
|
|
|
|
||
Amounts billed |
|
|
( |
) |
|
|
( |
) |
Unbilled receivables, end of year |
|
$ |
|
|
$ |
|
||
Contract liabilities |
|
|
|
|
|
|
||
Contract liabilities, beginning of year |
|
$ |
|
|
$ |
|
||
Revenue recognized |
|
|
( |
) |
|
|
( |
) |
Payments received |
|
|
|
|
|
|
||
Contract liabilities, end of year |
|
$ |
|
|
$ |
|
The timing of revenue recognition, invoicing and cash collections results in billed accounts receivable and unbilled receivables (contract assets) and deferred revenue (contract liabilities). We invoice our customers in accordance with agreed-upon contractual terms, typically at periodic intervals or upon achievement of contractual milestones. Invoicing may occur subsequent to revenue recognition, resulting in unbilled receivables. We may receive advance payments from our customers before revenue is recognized, resulting in contract liabilities. The unbilled receivables and deferred revenue reported on the Balance Sheets relate to the KKC Commercialization Agreement, the KKC Japan License Agreement and Helsinn License Agreement.
As of June 30, 2021, we had $
As of June 30, 2021, we had $
Our contract liabilities accounted for under Topic 606 relate to the amount of initial upfront consideration that was allocated to the development services performance obligations. Contract liabilities are recognized over the duration of the performance obligations based on the costs incurred relative to total expected costs.
Revenues from Collaborators
We earn revenue in connection with collaboration agreements, which are detailed in Note 2, KKC Agreements.
At contract inception, we assess whether the collaboration arrangements are within the scope of ASC Topic 808, Collaborative Arrangements (“Topic 808”), to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities. This assessment is performed based on the responsibilities of all parties in the arrangement. For collaboration arrangements within the scope of Topic 808 that contain multiple units of account, we first determine which units of account within the arrangement are within the scope of Topic 808 and which elements are within the scope of Topic 606. For units of account within collaboration arrangements that are accounted for pursuant to Topic 808, an appropriate recognition method is determined and applied consistently, by analogy to authoritative accounting literature. For elements of collaboration arrangements that are accounted for pursuant to Topic 606, we recognize revenue as discussed above. Consideration received that does not meet the requirements to satisfy Topic 606 revenue recognition criteria is recorded as deferred revenue in the accompanying balance sheets, classified as either short-term or long-term deferred revenue based on our best estimate of when such amounts will be recognized.
70
Cost of Revenue
Cost of revenue primarily includes external costs paid to third-party contractors to perform research, conduct clinical trials and develop and manufacture drug materials, and internal compensation and related personnel expenses to support our research and development performance obligations associated with the Helsinn License Agreement.
Research and Development
Research and development costs are expensed as incurred and include costs paid to third-party contractors to perform research, conduct clinical trials and develop and manufacture drug materials. Clinical trial costs, including costs associated with third-party contractors, are a significant component of research and development expenses. We expense research and development costs based on work performed. In determining the amount to expense, management relies on estimates of total costs based on contract components completed, the enrollment of subjects, the completion of trials, and other events. Costs incurred related to the purchase or licensing of in-process research and development for early-stage products or products that are not commercially viable and ready for use, or have no alternative future use, are charged to expense in the period incurred.
Share-based Compensation
Share-based compensation expense for employees and directors is recognized in the Statement of Operations based on estimated amounts, including the grant date fair value and the expected service period. For stock options, we estimate the grant date fair value using a Black-Scholes valuation model, which requires the use of multiple subjective inputs including estimated future volatility, expected forfeitures and the expected term of the awards. We estimate the expected future volatility based on the stock’s historical price volatility. The stock’s future volatility may differ from the estimated volatility at the grant date. For restricted stock unit (“RSU”) equity awards, we estimate the grant date fair value using our closing stock price on the date of grant. We recognize the effect of forfeitures in compensation expense when the forfeitures occur. The estimated forfeiture rates may differ from actual forfeiture rates which would affect the amount of expense recognized during the period. We recognize the value of the awards over the awards’ requisite service or performance periods. The requisite service period is generally the time over which our share-based awards vest.
Interest and Dividend Income
Interest on cash balances is recognized when earned. Dividend income is recognized when the right to receive the payment is established.
Income Taxes
Our income tax expense consists of current and deferred income tax expense or benefit. Current income tax expense or benefit is the amount of income taxes expected to be payable or refundable for the current year. A deferred income tax asset or liability is recognized for the future tax consequences attributable to tax credits and loss carryforwards and to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of June 30, 2021 and 2020, we have established a valuation allowance to fully reserve our net deferred tax assets. Tax rate changes are reflected in income during the period such changes are enacted. Changes in our ownership may limit the amount of net operating loss carryforwards that can be utilized in the future to offset taxable income.
The FASB Topic on Income Taxes prescribes a recognition threshold and measurement attribute criteria for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
Net Loss Per Share
Basic and diluted net loss per share are computed using the weighted-average number of shares of common stock outstanding during the period, less any shares subject to repurchase or forfeiture. There were
71
The following table presents the calculation of net loss used to calculate basic and diluted loss per share (in thousands):
|
|
Years Ended June 30, |
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
|
|
|||
|
|
(As Restated) |
|
|
(As Restated) |
|
|
2019 |
|
|||
Net loss—basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Change in fair value of warrant liability |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net loss—diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Shares used in calculating net loss per share was determined as follows (in thousands):
|
|
Years Ended June 30, |
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
Weighted average shares used in calculating net loss per share |
|
|
|
|
|
|
|
|
|
|||
Effect of potentially dilutive common shares from equity awards and liability-classified warrants |
|
|
|
|
|
— |
|
|
|
|
||
Weighted average shares used in calculating diluted loss per share |
|
|
|
|
|
|
|
|
|
The following potentially dilutive shares (in thousands) have been excluded from the calculation of net loss per share because of their anti-dilutive effect:
|
|
Years Ended June 30, |
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
Stock options |
|
|
|
|
|
|
|
|
|
|||
Restricted stock units |
|
|
|
|
|
— |
|
|
|
|
||
Warrants |
|
|
|
|
|
|
|
|
|
|||
Total anti-dilutive shares |
|
|
|
|
|
|
|
|
|
Recent Account Pronouncements
In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), as amended. The amendments in ASU 2016-13 require, among other things, financial assets measured at amortized cost basis to be presented at the net amount expected to be collected as compared to previous GAAP which delayed recognition until it was probable a loss had been incurred. The amendments in this standard are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating impact that adoption of this standard will have on its financial statements and related disclosures.
Note 2. KKC Agreements (As Restated)
KKC License, Development and Commercialization Agreement
In April 2020, we entered into the License, Development and Commercialization Agreement (the “KKC Commercialization Agreement”) with Kyowa Kirin Company (“KKC”). Under the agreement, we granted to KKC a co-exclusive, sublicensable, payment-bearing license under certain patents and know-how controlled by us to develop and commercialize zandelisib and any pharmaceutical product containing zandelisib for all human indications in the U.S. (the "U.S. License"), and an exclusive (subject to certain retained rights to perform obligations under the KKC Commercialization Agreement), sublicensable, payment-bearing, license under certain patents and know-how controlled by us to develop and commercialize zandelisib and any pharmaceutical product containing zandelisib for all human indications in countries outside of the United States (the “Ex-U.S.”) (the “Ex-U.S. License”). KKC granted to us a co-exclusive, sublicensable, license under certain patents and know-how controlled by KKC to develop and commercialize zandelisib for all human indications in the U.S., and a co-exclusive, sublicensable, royalty-free, fully paid license under certain patents and know-how controlled by KKC to perform our obligations in the Ex-U.S. under the KKC Commercialization Agreement. KKC paid us an initial payment of $
KKC will be responsible for the development and commercialization of zandelisib in the Ex-U.S. and, subject to certain exceptions, will be solely responsible for all costs related thereto. We will co-develop and co-promote zandelisib with KKC in the U.S., with the Company recording all revenue from U.S. sales. We will share U.S. profits and costs (including development costs) on a 50-50 basis with KKC. We will
72
also provide to KKC certain drug supplies necessary for the development and commercialization of zandelisib in the Ex-U.S., with the understanding that KKC will assume responsibility for manufacturing for the Ex-U.S. as soon as practicable.
We assessed the KKC Commercialization Agreement in accordance with Topic 808 and Topic 606 and determined that our obligations comprise the U.S. License, the Ex-U.S. License, and development services (the “Development Services”). We determined that the KKC Commercialization Agreement is a collaborative arrangement in accordance with Topic 808 that contains multiple units of account, as we and KKC are both active participants in the development and commercialization activities and are exposed to significant risks and rewards that are dependent on commercial success of the activities of the arrangement. The U.S. License is a unit of account under the scope of Topic 808 and is not a deliverable under Topic 606, while the Ex-U.S. License and Development Services performance obligations are under the scope of Topic 606.
We determined, at the time of our initial assessment, that the total transaction price of $
We allocated the transaction price to each unit of account. Variable consideration that relates specifically to our efforts to satisfy specific performance obligations are allocated entirely to those performance obligations. Other components of the transaction price are allocated based on the relative stand-alone selling price, over which management has applied significant judgment. We developed the estimated stand-alone selling price for the licenses using the risk-adjusted net present values of estimated cash flows, and the estimated stand-alone selling price of the development services performance obligations by estimating costs to be incurred, and an appropriate margin, using an income approach.
We determined that control of the U.S. License and Ex-U.S. License were transferred to KKC during the year ended June 30, 2020, and recognized revenue of $
KKC Japan License Agreement
In October 2018, we, as licensor, entered into a license agreement with KKC for zandelisib (“the KKC Japan License Agreement”). Under the terms of the KKC Japan License Agreement, KKC was granted the exclusive right to develop and commercialize zandelisib in Japan. We also granted KKC the right to purchase supply of zandelisib for commercial requirements at cost plus a pre-negotiated percentage, as well as manufacturing rights in Japan. In return, we received an upfront payment of $
We assessed the KKC Japan License Agreement in accordance with ASC 606 and determined that our performance obligations comprised the license, research and development obligations, and our obligation to provide clinical trial materials to KKC. We determined that the transaction price amounted to the upfront payment of $
We determined that control of the license was transferred to KKC during the year ended June 30, 2019. Revenue allocated to the research and development obligations was recognized based on the proportional performance of these research and development activities. Revenue allocated to providing clinical trial materials was recognized upon delivery.
Note 3. BeiGene Collaboration
In October 2018, we entered into a clinical collaboration with BeiGene, Ltd. (“BeiGene”) to evaluate the safety and efficacy of zandelisib in combination with BeiGene’s zanubrutinib (marketed as Brukinsa), an investigational inhibitor of Bruton’s tyrosine kinase (“BTK”), for the treatment of patients with B-cell malignancies. Under the terms of the clinical collaboration agreement, we amended our ongoing Phase 1b trial to include evaluation of zandelisib in combination with zanubrutinib in patients with B-cell malignancies. Study costs are being shared equally by the parties, and we agreed to supply zandelisib and BeiGene agreed to supply zanubrutinib. We record the costs reimbursed by BeiGene as a
73
reduction of our research and development expenses. We retained full commercial rights for zandelisib and BeiGene retained full commercial rights for zanubrutinib.
Note 4. Other License Agreements
Helsinn License Agreement
In August 2016, we entered into an exclusive worldwide license, development, manufacturing and commercialization agreement with Helsinn Healthcare SA, a Swiss pharmaceutical corporation (“Helsinn”) for pracinostat in acute myeloid leukemia ("AML"), myelodysplastic syndrome ("MDS") and other potential indications (the “Helsinn License Agreement”). Under the terms of the agreement, Helsinn was granted a worldwide exclusive license to develop, manufacture and commercialize pracinostat, and is primarily responsible for funding its global development and commercialization. As compensation for such grant of rights, we received payments of $
We determined that the agreement contains multiple performance obligations for purposes of revenue recognition. Revenue related to the research and development elements of the arrangement is recognized based on the extent of progress toward completion of each performance obligation. Revenue is recognized on a gross basis as we are the primary obligor and have discretion in supplier selection. During the year ended June 30, 2021, our only remaining performance obligation under the agreement was the conduct of a Phase 2 dose-optimization study of pracinostat in combination with azacitidine in patients with high and very high risk MDS who are previously untreated with hypomethylating agents (the “POC study”), for which Helsinn has agreed to share third-party expenses. As of June 30, 2021, our performance obligations related to the Helsinn License Agreement have been met, and no future revenue or costs of revenue will be recognized.
Presage License Agreement
In September 2017, we, as licensee, entered into a license agreement with Presage Biosciences, Inc. (“Presage”). Under the terms of the license agreement, Presage granted to us exclusive worldwide rights to develop, manufacture and commercialize voruciclib, a clinical-stage, oral and selective CDK inhibitor, and related compounds. In exchange, we paid $
Note 5. Intangible Assets
Intangible assets consisted of the following, in thousands:
|
|
June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
S*Bio Patents—Gross |
|
$ |
|
|
$ |
|
||
Less: accumulated amortization |
|
|
( |
) |
|
|
( |
) |
Intangible assets, net |
|
$ |
|
|
$ |
|
Amortization expense of intangible assets for the years ended June 30, 2021, 2020 and 2019 was
Note 6. Property and Equipment
Property and equipment consisted of the following, in thousands:
|
|
June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Furniture and equipment |
|
$ |
|
|
$ |
|
||
Leasehold improvements |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
74
Depreciation expense of property and equipment for the years ended June 30, 2021, 2020 and 2019 was $
Note 7. Accrued Liabilities
Accrued liabilities consisted of the following, in thousands:
|
|
June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Accrued pre-clinical and clinical trial expenses |
|
$ |
|
|
$ |
|
||
Accrued compensation and benefits |
|
|
|
|
|
|
||
Accrued legal and professional services expenses |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total accrued liabilities |
|
$ |
|
|
$ |
|
Note 8. Stockholders’ Equity
Equity Transactions
Shelf Registration Statement
We have a shelf registration statement that permits us to sell, from time to time, up to $
At-The-Market Equity Offering
On November 10, 2020, we entered into an At-The-Market Equity Offering Sales Agreement (the “2020 ATM Sales Agreement”), pursuant to which we may sell an aggregate of up to $
Underwritten Registered Offering
In December 2019, we completed an underwritten registered offering of
Warrants
As of June 30, 2021, we have outstanding warrants to purchase
Description of Capital Stock
Our total authorized share capital is
75
Common Stock
The holders of common stock are entitled to
Preferred Stock
Our Board of Directors has the authority to issue up to
Note 9. Share-based Compensation
We use equity-based compensation programs to provide long-term performance incentives for our employees. These incentives consist primarily of stock options and RSUs. In December 2008, we adopted the MEI Pharma, Inc. 2008 Stock Omnibus Equity Compensation Plan (“Omnibus Plan”), as amended and restated from time-to-time, under which
In May 2021, we adopted the 2021 Inducement Plan ("Inducement Plan"), under which
Total share-based compensation expense for all stock awards consists of the following, in thousands:
|
|
Years Ended June 30, |
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|||
General and administrative |
|
|
|
|
|
|
|
|
|
|||
Total share-based compensation |
|
$ |
|
|
$ |
|
|
$ |
|
Stock Options
Stock options granted to employees vest
A summary of our stock option activity and related data follows:
|
|
Number of |
|
|
Weighted-Average |
|
|
Weighted-Average |
|
|
Aggregate |
|
||||
Outstanding at June 30, 2020 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Forfeited / Cancelled |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Outstanding at June 30, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested and exercisable at June 30, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
76
As of June 30, 2021, the aggregate intrinsic value of outstanding options is calculated as the difference between the exercise price of the underlying options and the closing price of our common stock of $
A summary of our non-vested stock option activity:
|
|
Number of |
|
|
Weighted-Average |
|
||
Non-vested at June 30, 2020 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Forfeited |
|
|
( |
) |
|
$ |
|
|
Vested |
|
|
( |
) |
|
$ |
|
|
Non-vested at June 30, 2021 |
|
|
|
|
$ |
|
Unrecognized compensation expense related to non-vested stock options totaled $
We use a Black-Scholes valuation model to estimate the grant date fair value of stock options. To calculate these fair values, the following weighted-average assumptions were used:
|
|
Years Ended June 30, |
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
Risk-free interest rate |
|
|
% |
|
|
% |
|
|
% |
|||
Expected life (years) |
|
|
|
|
|
|
|
|
|
|||
Expected volatility |
|
|
% |
|
|
% |
|
|
% |
|||
Dividend yield |
|
|
% |
|
|
% |
|
|
% |
|||
Weighted-average grant date fair value |
|
$ |
|
|
$ |
|
|
$ |
|
Restricted Stock Units
A summary of our RSU activity and related data follows:
|
|
Number of |
|
|
Weighted-Average |
|
||
Non-vested at June 30, 2020 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Forfeited |
|
|
( |
) |
|
$ |
|
|
Non-vested at June 30, 2021 |
|
|
|
|
$ |
|
Each RSU represents the contingent right to receive
Note 10. Commitments and Contingencies
We have contracted with various consultants and third parties to assist us in pre-clinical research and development and clinical trials work for our leading drug compounds. The contracts are terminable at any time, but obligate us to reimburse the providers for any time or costs incurred through the date of termination. We also have employment agreements with certain of our current employees that provide for severance payments and accelerated vesting for share-based awards if their employment is terminated under specified circumstances.
Presage License Agreement
As discussed in Note 4, we are party to a license agreement with Presage under which we may be required to make future payments upon the achievement of certain development, regulatory and commercial milestones, as well as potential future royalties based upon net sales. As of June 30, 2021, we had
S*Bio Purchase Agreement
77
We are party to a definitive asset purchase agreement with S*Bio, pursuant to which we acquired certain assets comprised of intellectual property and technology including rights to pracinostat. We agreed to make certain milestone payments to S*Bio based on the achievement of certain clinical, regulatory and net sales-based milestones, as well as to make certain contingent earnout payments to S*Bio. Milestone payments will be made to S*Bio up to an aggregate amount of $
COVID-19
As a result of the ongoing and rapidly evolving COVID-19 pandemic, various public health orders and guidance measures have been implemented across much of the United States, and across the globe, including in the locations of our office, clinical trial sites, key vendors and partners. Despite the relaxation of many governmental orders earlier this year, COVID-19 still impacts the normal conduct of business. While we continue to enroll and dose patients in our clinical trials, our clinical development program timelines may continue to be subject to potential negative impacts from the ongoing pandemic in the U.S. and globally.
We may experience enrollment delays and suspensions, patient withdrawals, postponement of planned clinical or preclinical studies, redirection of site resources from studies, and study deviations or noncompliance. We may also need to maintain or implement study modifications, suspensions, or terminations, the introduction of additional remote study procedures and modified informed consent procedures, study site changes, direct delivery of investigational products to patient homes or alternative sites, which may require state licensing, and changes or delays in site monitoring. The foregoing may require that we consult with relevant review and ethics committees, IRBs, and the FDA. The foregoing may also impact the integrity of our study data. The COVID-19 outbreak may further increase the need for clinical trial patient monitoring and regulatory reporting of adverse effects, and may delay regulatory authority meetings, inspections, or the regulatory review of marketing or investigational applications or submissions.
Not only might the continuing COVID-19 pandemic impact the conduct of our clinical trials, but it may also impact our ability to procure the necessary supply of our investigational drug products, as well as any ancillary supplies necessary for the conduct of our studies. Third party manufacturers may also need to implement measures and changes, or deviate from typical manufacturing requirements that may otherwise adversely impact our product candidates.
Government stimulus programs enacted in response to the COVID-19 pandemic have not had a material impact on our financial condition, results of operations, or liquidity.
Legal Proceedings
On August 10, 2020, Guy Bahat, an individual who allegedly purchased 50 shares of our common stock filed a putative securities class action lawsuit (the “Securities Class Action”) in the United States District Court for the Southern District of California against the Company, Dr. Daniel P. Gold, and Mr. Brian G. Drazba, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder. Mr. Bahat did not seek appointment as lead plaintiff, and the court appointed another individual, Ramesh Mahalingham, as lead plaintiff. The plaintiff seeks to sue on behalf of all purchasers of our securities from August 2, 2017 through July 1, 2020 and alleges, among other things, that we made false and misleading statements relating to pracinostat during the proposed class period. On February 16, 2021, the lead plaintiff filed a notice of voluntary dismissal without prejudice, thereby concluding the class action litigation.
On October 21, 2020, Peter D’Arcy, an individual who alleges that he is a Company stockholder, filed a putative stockholder derivative action nominally on behalf of the Company in the United States District Court for the District of Delaware (the “Derivative Action”) against Dr. Gold, Mr. Drazba, Mr. Charles V. Baltic, III, Dr. Kevan E. Clemens, Mr. Frederick W. Driscoll, Dr. Nicholas R. Glover, Ms. Tamar D. Howson, Dr. Thomas C. Reynolds, Mr. William D. Rueckert, and Dr. Christine A. White, and naming the Company as a nominal defendant. Additional putative stockholder derivative suits were filed in the same court naming the same defendants plus Dr. Robert D. Mass on December 2, 2020 and December 15, 2020 by Gerald Wright and William Trablicy, respectively, who also allege that they are Company stockholders, and these additional suits were consolidated into the Derivative Action by court order. The Derivative Action is based upon the pracinostat-related allegations in the Securities Class Action described above, and alleges claims under Section 14(a) of the Exchange Act and claims for breach of fiduciary duty, unjust enrichment, corporate waste, and contribution. On February 24, 2021, following the resolution of the class action litigation, the parties stipulated request for voluntary dismissal without prejudice, which the court granted on February 25, 2021.
Note 11. Leases
We entered into a lease agreement for approximately
78
option to renew and extend the lease terms. We have not included the lease extension within the ROU asset and lease liability on the balance sheet as it is not reasonably certain to be exercised. The lease includes variable non-lease components (e.g., common area maintenance, maintenance, etc.) that are not included in the ROU asset and lease liability and are reflected as an expense in the period incurred. We do not have any other operating or finance leases. Upon commencement of the lease, we recognized an operating lease ROU asset of $
The total operating lease costs were as follows (in thousands):
|
|
Years Ended June 30, |
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
Operating lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
Supplemental cash flow information related to our operating leases were as follows (in thousands):
|
|
Years Ended June 30, |
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
|
|||
Operating cash flows from operating leases |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Right-of-use assets obtained in exchange for operating lease obligations: |
|
$ |
|
|
$ |
|
|
$ |
|
The following is a schedule of the future minimum rental payments for our operating leases, reconciled to the lease liability as of June 30, 2021 (in thousands):
|
|
June 30, |
|
|
Years ending June 30, |
|
|
|
|
2022 |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Thereafter |
|
|
|
|
Total lease payments |
|
|
|
|
Less: Present value discount |
|
|
( |
) |
Total operating lease liability |
|
$ |
|
|
|
|
|
|
|
Balance Sheet Classification - Operating Leases |
|
|
|
|
Operating lease liability |
|
$ |
|
|
Operating lease liability, long-term |
|
|
|
|
Total operating lease liability |
|
$ |
|
|
|
|
|
|
|
Other Balance Sheet Information - Operating Leases |
|
|
|
|
Weighted average remaining lease term (in years) |
|
|
|
|
Weighted average discount rate |
|
|
% |
Note 12. Segment Information
We have
Note 13. Income Taxes
Pre-tax loss consists of the following jurisdictions (in thousands):
|
|
Years Ended June 30, |
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
|
(As Restated) |
|
|
|
|
||||||
Domestic |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Foreign |
|
|
|
|
|
|
|
|
|
|||
Pre-tax loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
79
The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax expense is as follows (in thousands):
|
|
Years Ended June 30, |
|
|||||||||||||||||||||
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||||||||||||||
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
||||||
|
|
(As Restated) |
|
|
|
|
|
|
|
|||||||||||||||
Tax benefit at U.S. statutory rates |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||
State tax |
|
|
( |
) |
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
|||||
Warrant liability costs |
|
|
|
|
|
% |
|
|
( |
) |
|
|
( |
)% |
|
|
|
|
|
% |
||||
Equity compensation |
|
|
( |
) |
|
|
% |
|
|
( |
) |
|
|
% |
|
|
|
|
|
% |
||||
Increase in valuation allowance |
|
|
( |
) |
|
|
( |
)% |
|
|
( |
) |
|
|
( |
)% |
|
|
( |
) |
|
|
( |
)% |
Other |
|
|
( |
) |
|
|
( |
)% |
|
|
( |
) |
|
|
( |
)% |
|
|
( |
) |
|
|
( |
)% |
|
|
$ |
( |
) |
|
|
% |
|
$ |
( |
) |
|
|
% |
|
$ |
( |
) |
|
|
% |
Deferred tax liabilities and assets are comprised of the following (in thousands):
|
|
June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(As Restated) |
|
|||||
Deferred tax assets (liabilities): |
|
|
|
|
|
|
||
Deferred revenue |
|
$ |
|
|
$ |
|
||
Fixed and intangible assets |
|
|
|
|
|
|
||
Share-based payments |
|
|
|
|
|
|
||
Tax losses carried forward |
|
|
|
|
|
|
||
Compensation accruals |
|
|
|
|
|
|
||
Consultant and other accruals |
|
|
|
|
|
|
||
Right-of-use assets |
|
|
( |
) |
|
|
|
|
Lease liabilities |
|
|
|
|
|
|
||
Charitable contributions |
|
|
|
|
|
|
||
Total deferred tax assets (liabilities) |
|
|
|
|
|
|
||
Valuation allowance for deferred tax assets |
|
|
( |
) |
|
|
( |
) |
Net deferred tax assets and liabilities |
|
$ |
|
|
$ |
|
We evaluate the recoverability of the deferred tax assets and the amount of the required valuation allowance. Due to the uncertainty surrounding the realization of the tax deductions in future tax returns, we have recorded a valuation allowance against our net deferred tax assets as of June 30, 2021 and 2020. At such time as it is determined that it is more likely than not that the deferred tax assets will be realized, the valuation allowance would be reduced.
We had federal and state net operating loss carryforwards of approximately $
Our ability to utilize our net operating loss carryforwards may be substantially limited due to ownership changes that have occurred or that could occur in the future under Section 382 of the Internal Revenue Code and similar state laws. During 2021, we completed a study to analyze whether one or more ownership changes had occurred and determined that two such ownership changes did occur. While the ownership changes do limit the amount of net operating loss we are able to use each year, all of our net operating losses are expected to be available for utilization prior to expiring.
None of our prior income tax returns have been selected for examination by a major taxing jurisdiction; however, the statutes of limitations for various filings remain open. The oldest filings subject to potential examination for federal and state purposes are 2018 and 2017, respectively. If we utilize a net operating loss related to a closed tax year, the tax year in which the loss was incurred is subject to adjustment up to the amount of the net operating loss.
We have not reduced any tax benefit on our financial statements due to uncertain tax positions as of June 30, 2021 and we are not aware of any circumstance that would significantly change this result through the end of fiscal year 2021. To the extent we incur income-tax related penalties or interest, we will recognize them as additional income tax expense.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES” Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits net operating loss carryforwards generated in taxable years beginning after December 31, 2017, to offset
80
81
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures (As Restated)
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Office and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of the end of the period covered by this report. At the time our Original Annual Report Form 10-K for the year ended June 30, 2021 was filed on September 2, 2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2021, our disclosure controls and procedures were effective.
Subsequent to that evaluation, as a result of the material weakness described below, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2021, our disclosure controls and procedures were not effective.
Restatement of Previously Issued Financial Statements
On May 10, 2022, we determined that we made certain errors in the manner in which we recognized revenue from our License, Development and Commercialization Agreement with Kyowa Kirin Company (the "KKC Commercialization Agreement") with the result that revenue was overstated in some quarters and understated in other quarters in our financial statements for the fiscal years ended June 30, 2021 and 2020. The errors relate to the appropriate timing and amounts of revenue recognized over time under the cost-to-cost method associated with the KKC Commercialization Agreement. These errors did not have any effect on our previously reported operating expenses or cash and short-term investments.
Management’s Annual Report on Internal Control Over Financial Reporting (As Restated)
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a - 15(f) under the Exchange Act. Our internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
(i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of assets;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as of June 30, 2021. In making this assessment, our management used the criteria set forth in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
In Management's Report on Internal Control over Financial Reporting included in our Original Form 10-K for the year ended June 30, 2021, our management previously concluded that we maintained effective internal control over financial reporting as of June 30, 2021. Management subsequently concluded that the material weakness existed as of June 30, 2021.
82
In May 2022, we determined that we made certain errors in the manner in which we recognized revenue from our License, Development and Commercialization Agreement with Kyowa Kirin Company (the "KKC Commercialization Agreement"), with the result that revenue was overstated in some quarters and understated in other quarters in our financial statements during 2020 and 2021. As a result, we determined that there were material errors in the financial statements that required a restatement of the 2021 and 2020 financial statements included in the Original Form 10-K for the year ended June 30, 2021. This was due to the inadequate design and implementation of controls to evaluate and monitor the accounting for revenue recognition related to license agreements. Accordingly, management has determined that this control deficiency constitutes a material weakness and, as a result, management has concluded that, as of June 30, 2021, our internal control over financial reporting was not effective based on the criteria in Internal Control Integrated Framework (2013) issued by the COSO. Accordingly, management has restated its report on internal control over financial reporting.
Remediation Plan for Material Weakness
Management is actively engaged in the planning for, and implementation of, remediation efforts to address the material weakness. The remediation plan includes enhancement of our existing contract review control for license agreements to confirm appropriate understanding of the terms as well as implementation of a new control designed to evaluate and monitor, at inception and on a quarterly basis, the estimated consideration to be received under license agreements for purposes of revenue recognition, and enhanced detailed review of our revenue recognition models.
Changes in Internal Control over Financial Reporting
Other than the material weakness discussed above, there were no changes in our internal control over financial reporting (as such term is defined by Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. In light of the restatement of our financial statements included in this Form 10-K/A, we plan to enhance our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards related to revenue recognition that apply to our financial statements. Our plans at this time include increased communication between our personnel and third-party professionals with whom we consult regarding complex accounting applications as well as implementation of a new control designed to evaluate and monitor the estimated consideration to be received under license agreements for purposes of revenue recognition, and enhanced detailed review of our revenue recognition models.
The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
Item 9B. Other Information
None.
83
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Code of Ethics
We have adopted a Code of Business and Ethics policy that applies to our directors and employees (including our principal executive officer and our principal financial officer), and have posted the text of our policy on our website (www.meipharma.com). In addition, we intend to promptly disclose (i) the nature of any amendment to the policy that applies to our principal executive officer and principal financial officer and (ii) the nature of any waiver, including an implicit waiver, from a provision of the policy that is granted to one of these specified individuals, the name of such person who is granted the waiver and the date of the waiver on our website in the future. Except as expressly stated herein, information contained on our website is not incorporated by reference herein and shall not be deemed a part of this Amended Annual Report on Form 10-K/A.
The other information required by this item is incorporated herein by reference to our proxy statement for the fiscal year ended June 30, 2021 (the “Proxy Statement”).
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference to the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated herein by reference to the Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated herein by reference to the Proxy Statement.
Item 14. Principal Accountant Fees and Services.
The information required by this item is incorporated herein by reference to the Proxy Statement.
84
PART IV
Item 15. Exhibits, Financial Statement Schedules
Reference is made to the Financial Statements under Item 8 in Part II hereof.
2. Financial Statement Schedules
The Financial Statement Schedules have been omitted either because they are not required or because the information has been included in the financial statements or the notes thereto included in this Amended Annual Report on Form 10-K/A.
3. Exhibits
Exhibit Index
|
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3.1 |
|
|
|
|
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3.5 |
|
|
|
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3.6 |
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3.7 |
|
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4.1 |
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4.2 |
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4.3 |
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10.1 |
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10.2 |
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10.3 |
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10.4 |
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10.5 |
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10.6 |
|
|
|
|
85
10.7 |
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|
10.8** |
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|
10.9 |
|
|
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10.10 |
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10.11** |
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10.12*** |
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23.1 |
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31.1 |
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31.2 |
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32.1 |
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101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document* |
|
|
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101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document* |
|
|
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101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document* |
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document* |
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document* |
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document * |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document)* |
(*) |
Filed herewith. |
(**) |
Portions of this exhibit have been redacted pursuant to a confidential treatment request filed with the Securities and Exchange Commission. |
(***) |
Portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. |
Item 16. Form 10-K Summary
None.
86
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this Annual Report on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized, on May 23, 2022.
|
|
|
MEI PHARMA, INC. |
||
A Delaware Corporation |
||
|
|
|
By: |
|
/s/ Daniel P. Gold |
|
|
Daniel P. Gold |
|
|
Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K/A has been signed below by the following persons on behalf of the registrant and in the capacities indicated on May 23, 2022.
|
Signatures |
|
Title |
|
|
|
|
|
By: |
|
/s/ Daniel P. Gold |
|
President, Chief Executive Officer and Director |
|
|
|
|
|
|
Daniel P. Gold |
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
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|
||||
By: |
|
/s/ Brian G. Drazba |
|
Secretary, Chief Financial Officer |
|
|
|
|
|
|
Brian G. Drazba |
|
(Principal Financial and Accounting Officer) |
|
|
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|
||||
By: |
|
/s/ Christine A. White |
|
Chairman |
|
|
|
|
|
|
Christine A. White |
|
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|
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|
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|
|
||||
By: |
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/s/ Charles V. Baltic III |
|
Director |
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|
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|
|
Charles V. Baltic |
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|
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||||
By: |
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/s/ Thomas C. Reynolds |
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Director |
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|
|
Thomas C. Reynolds |
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||||
By: |
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/s/ Nicholas R. Glover |
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Director |
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|
|
|
|
Nicholas R. Glover |
|
|
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||||
By: |
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/s/ Sujay Kango |
|
Director |
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|
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Sujay Kango |
|
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|
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|
||||
By: |
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/s/ Frederick W. Driscoll |
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Director |
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|
|
|
|
|
Frederick W. Driscoll |
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|
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|
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|
||||
By: |
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/s/ Tamar D. Howson |
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Director |
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|
|
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|
|
Tamar D. Howson |
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|
|
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|
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|
|
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|
||||
By: |
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/s/ Cheryl L. Cohen |
|
Director |
|
|
|
|
|
|
Cheryl L. Cohen |
|
|
|
|
|
87
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
MEI Pharma, Inc.
San Diego, California
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File Nos. 333-238056, 333-225465, 333-186070, 333-184011, 333-174789, 333-146453, and 333-136440) and Form S-8 (File Nos. 333-255830, 333-251976, 333-229554, 333-216103, 333-213278, 333-201703, 333-179591, 333-174790, 333-169719, and 333-156985) of MEI Pharma, Inc. of our report dated September 2, 2021, except for the effects of the restatement disclosed in Note 1, Revenue Recognition and Net Loss Per Share paragraphs of Note 1A, Note 2 and Note 13 which is dated May 23, 2022, relating to the financial statements, which appears in this Form 10-K/A.
/s/ BDO USA, LLP
San Diego, California
May 23, 2022
Exhibit 31.1
CERTIFICATION
I, Daniel P. Gold, certify that:
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Date: May 23, 2022 |
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/s/ Daniel P. Gold |
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Daniel P. Gold |
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Chief Executive Officer |
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(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
I, Brian G. Drazba, certify that:
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Date: May 23, 2022 |
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/s/ Brian G. Drazba |
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Brian G. Drazba |
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Chief Financial Officer |
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(Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION
Each of the undersigned hereby certifies, for the purposes of Section 1350 of Chapter 63 of Title 18 of the U.S. Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of MEI Pharma, Inc. (“MEI Pharma”) that, to his knowledge, this Annual Report on Form 10-K/A of MEI Pharma, for the year ended June 30, 2021, fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of MEI Pharma.
Date: May 23, 2022
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/s/ Daniel P. Gold |
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/s/ Brian G. Drazba |
Daniel P. Gold |
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Brian G. Drazba |
Chief Executive Officer |
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Chief Financial Officer |
(Principal Executive Officer) |
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(Principal Financial Officer) |
These certifications accompanying the report to which they relate, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of MEI Pharma under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent MEI Pharma specifically incorporates it by reference.
A signed original of this written statement required by Section 906 has been provided to MEI Pharma and will be retained by MEI Pharma and furnished to the Securities and Exchange Commission or its staff upon request.
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